A step-by step guide to the VA cash-out refinance loan
The VA cash-out refinance has exceptional benefits. It can help you access all the equity in your home, and veterans can use the VA cash-out refi even if their current mortgage is not a VA loan.
Verify your VA cash-out refinance eligibilityHomeowners with any type of home loan can use this refi program to potentially benefit from low VA cash-out refinance rates, no mortgage insurance, and cash back at closing.
Here’s what you need to know about VA cash-out guidelines and how you can qualify.
In this article (Skip to...)
- VA cash-out rates
- VA cash-out guidelines
- Max LTV
- Loan limits
- VA cash-out process
- VA cash-out lenders
- Best uses for a cash-out refi
- VA cash-out FAQ
VA cash-out refinance rates
The VA cash-out refinance gives veterans and active-duty service members a chance to refinance into a new loan with a lower interest rate and/or receive cash back.
Verify your VA cash-out refinance eligibility. Start hereVA cash-out refinance rates are typically the lowest in the market thanks to backing from the Department of Veterans Affairs.
Today’s VA cash-out refi rates start at just % (% APR), according to our lender network*. Compared to % (% APR) for a 30-year conventional loan, VA cash-out refinance rates are a great deal.
| VA Loan Type | Today’s Average Rate |
| VA 30-year fixed-rate | % (% APR) |
| VA 15-year fixed-rate | % (% APR) |
*Average rates assume 0% down and a 740 credit score. See our full rate assumptions here.
VA cash-out refinance rates vs. ‘standard’ VA rates
One thing to keep in mind is that VA cash-out refi rates tend to be a little higher than no-cash-out mortgage interest rates. That means VA cash-out refinance rates might be around 0.125% to 0.25% higher than VA loan rates you see advertised online.
However, this rule is not set in stone. Your own refinance rate depends on factors like your credit score and home equity — so if your personal finances are in a good place, you might get a great deal on a VA refinance cash-out loan.
And remember, you don’t have to refinance with your current mortgage lender. Use this to your advantage. You can shop around with multiple VA-approved lenders to see which one can offer the lowest VA cash-out refinance rates to you.
VA cash-out guidelines for 2024
To qualify for a VA-backed loan, you’ll need to meet the minimum VA cash-out refinance guidelines set by the Department of Veterans Affairs and by your individual mortgage lender. Below, we’ll walk you through the key points you need to know, including fees, service requirements, and credit score guidelines.
Compare VA cash-out refinance rates. Start hereLender requirements
While the VA sets general rules for VA-backed loans, your lender will have their own VA cash-out guidelines you’ll need to fulfill.
*VA cash-out refinance credit score requirements vary from one lender to the next because each lender assesses risk differently. So shopping around helps you find the best terms on your new loan.
VA funding fee
To qualify, you’ll also need to pay what’s called a VA funding fee. The VA funding fee is a one-time payment that helps keep the VA loan program available to future borrowers. Most people roll this fee into their loan amount, so you won’t need to pay it upfront.
As of the time of this writing, the funding fees for a VA cash-out refinance loan are 2.15% for the first use and 3.3% for any subsequent use.
| VA Cash Out Refi | Funding Fee |
| Cash-out refinance: first use | 2.15% |
| Cash-out refinance: subsequent use | 3.3% |
| VA IRRRL loan | 0.5% |
Keep in mind that the VA funding fee may be waived if:
- You’re a veteran receiving VA disability benefits.
- You’re a surviving spouse of veterans who died in service or from a service-related injury
- You’re a Purple Heart recipient currently serving on active duty.
Service requirements
To meet the VA cash-out guidelines, applicants must also satisfy one of the following military service requirements:
- Served at least 24 continuous months on active duty or 90 days if called to active service.
- For those who served before August 1, 1990, a minimum of 181 continuous days on active duty is required.
- Completed 6 years in the Reserves or National Guard, or 90 days of active service under Title 10 or Title 32, with at least 30 consecutive days.
- Be a surviving spouse of a service member who died in the line of duty.
If medically discharged, these time requirements may be waived.
Certificate of Eligibility (COE)
The Certificate of Eligibility (COE) proves that you qualify for a VA home loan. Most lenders will help you get this document, but you can also apply for it directly through the Department of Veterans Affairs.
You’ll need your COE before moving ahead with the cash-out refinance VA loan.
If you have any U.S. military experience whatsoever, it’s worth checking your eligibility for a VA loan. Remember, you can use the cash-out VA refinance to get a new loan, even if your current mortgage is not backed by the VA.
Max LTV for VA cash-out refinance
Loan-to-value (LTV) ratio is a key VA cash-out refinance guideline. This ratio compares your loan amount to the value of your home and helps determine how much equity you can access.
The maximum LTV on a VA cash-out refinance is 100%. This means you can borrow up to 100% of your home’s appraised value, giving veterans full access to their home equity.
Example: Imagine you have an existing mortgage on a home worth $700,000. In 2024, you still owe $500,000 on the home. You could use a VA cash-out refinance to get a new loan for $700,000 on that home — allowing you to take the full $200,000 in cash, less closing costs.
Even though most lenders allow a VA cash-out refinance max LTV of 100%, some set their own rules. So be sure to get multiple quotes to find your best deal.
VA cash-out refinance loan limits
As of January 1, 2020, there are no longer any VA cash-out refinance limits. Qualified borrowers can finance 100 percent of their home’s value with no down payment. That applies to both VA purchase and refinance loans.
Verify your VA cash-out refinance eligibility. Start hereSo, what does “no limit” mean for your cash-out refinance? It means you could refinance the home for 100 percent of its value and take all your home equity out as cash. That would have been impossible pre-2020 when VA loan limits were more or less equal to conforming loan limits.
This doesn’t mean you’re guaranteed a loan that’s 100 percent of your home value. You’ll still have to qualify by meeting your lender’s minimum credit score and DTI guidelines.
The VA cash-out refinance process
The VA cash-out refinance process will be similar to the mortgage process you went through when you bought your home. Homeowners who want a VA cash-out loan will:
Check your VA cash-out refinance eligibility. Start here- Choose a VA lender: Compare at least three to five lenders to make sure you’re getting the best deal
- Get your certificate of Eligibility (COE): Your loan officer can easily pull this for you in a few minutes
- Complete your loan application: You’ll submit supporting documents like bank statements, pay stubs, and W2s
- Get a new home appraisal:The lender will order an appraisal on your behalf. The new appraised value determines how much equity you have available to withdraw
- Go through underwriting: This is mostly a waiting game while the lender verifies your financials. Be sure to respond to any document requests quickly
- Close the loan: On closing day, you’ll sign your final loan documents and pay closing costs
Keep in mind, a VA cash-out refi requires full underwriting. That means it will require more time and paperwork than the VA Interest Rate Reduction Refinance Loan (IRRRL), which has reduced paperwork.
If you use the cash-out VA refinance loan, be prepared to show:
- Income documents (pay stubs and/or W2s)
- Bank statements
- Potentially, tax returns
- A credit report and credit score
- A new home appraisal
- Your current mortgage balance
You might also be asked for an itemized list of debts to be paid off with loan proceeds, if you plan to use your cash-out funds for debt consolidation.
VA cash-out mortgage lenders
Choosing a mortgage lender for your VA cash-out refinance loan is a crucial part of the process. That’s because only some lenders allow you to take full advantage of your VA cash-out benefits.
Get matched with a VA cash-out lender. Start hereFor example, the Department of Veterans Affairs allows up to 100% financing. So you can technically withdraw all your home equity using a VA cash-out loan. But not all lenders follow VA’s rules to a tee. Many only allow up to 90% financing — or even lower.
This is especially important for homeowners who made a small down payment, or haven’t owned their homes very long. If you have minimal home equity to begin with, you need a VA cash-out lender that will be flexible about your loan-to-value ratio in order to qualify.
Your mortgage lender affects your interest rates, too.Remember that VA cash-out refinance rates are a little higher than no-cash-out VA refinance rates. So you want to be extra thorough when shopping for a lender that will give you a good deal.
For a good starting place, see our review of the best VA lenders. Or, you can get matched with a lender directly using the link below.
How does a VA cash-out refinance loan work?
A VA cash-out refinance loan replaces your existing mortgage loan with a new VA home loan. The new loan typically has a bigger balance than your existing one. And that difference — the extra loan amount — is returned to you as cash-back at closing.
Verify your VA cash-out refinance eligibility. Start hereHowever, you’re not required to cash out home equity with this loan. You can also use a VA cash-out refinance to replace a non-VA loan with a VA loan and lower your mortgage interest rate.
Only veterans and current military service members can apply for a VA mortgage refinance.
VA cash-out refinance benefits
Unlike the VA Streamline Refinance (“IRRRL”) program, a cash-out refinance VA loan allows you to:
The max LTV for VA cash-out refinance loans is 100%. That means you could get a loan that’s as large as the value of your home. Most other cash-out refinance options cap loan sizes at 80% LTV.
The cash back can be used to pay off other debt, pay for home improvements, invest in real estate, or for any other purpose.
Example: Say an eligible homeowner owns a property worth $400,000. Their existing loan balance is $200,000. They could open a new VA cash-out loan for up to $400,000 and receive $200,000 cash back at closing, minus closing costs.
The VA cash-out loan is an excellent tool allowing veterans to access large amounts of cash quickly.
Best uses for a VA cash-out refinance
Cash-back isn’t the only reason to open a VA refinance cash-out loan. In fact, the name for this loan is a bit misleading. The VA cash-out refi can pay off and refinance any loan type, even if the applicant does not plan to receive cash at closing.
Compare VA cash-out refinance rates. Start hereThe veteran can:
- Pay off a non-VA loan
- Get cash at closing, or
- Do both simultaneously
The VA IRRRL, by comparison, is a VA-to-VA loan program only. You cannot use the IRRRL program if your current loan is FHA or any other type.
1. Use a VA cash-out refi to get rid of mortgage insurance
One of the biggest benefits of converting a non-VA loan to a VA loan is that VA loans don’t require ongoing mortgage insurance payments.
That means veterans can reduce their homeownership costs by paying off an FHA loan and canceling their FHA MIP. Likewise, VA-eligible homeowners can refinance out of a conventional loan that requires private mortgage insurance (PMI).
Example: A veteran purchased a home with an FHA loan in 2024. The outstanding loan amount is $250,000. The FHA mortgage insurance costs $175 per month. The veteran can use a VA cash-out loan to refinance the FHA mortgage into a VA one — even if they do not want to take additional cash out. The veteran now has a no-mortgage-insurance loan and, potentially, a new lower rate.
2. Refinance out of a more expensive mortgage loan program
VA financing can be used to pay off any home loan with unfavorable terms:
- An Alt-A loan with a high interest rate
- Interest-only loans
- Adjustable-rate mortgages
- First and second mortgage combo “piggyback” loans
- Standalone second mortgages
- Any loan that requires mortgage insurance
- Construction liens
- Judgment or tax liens
- Bridge loans
In short, you can refinance any home loan into a VA loan with more favorable terms — regardless of the type of loan it is. To get a better idea about your potential savings, you can use a refinance calculator.
3. Refinance a high-LTV mortgage into a lower interest rate
The housing downturn happened more than a decade ago, but some veteran homeowners are still feeling the effects.
The good news (for veterans, anyway) is that the VA refinance cash-out loan can be opened for up to 100% of the home’s value. The VA program can refinance a loan to a lower rate even if the homeowner is nearly underwater.
For instance, say a veteran got a non-VA loan for $200,000 at an interest rate of 6.5%. Home values dropped, and they were unable to refinance into a conventional loan. As an eligible veteran, they could open a VA cash-out loan for 100% of the home’s current value, paying off the high-interest loan, and reducing their monthly payment.
4. Consolidate mortgages and other debt with a VA cash-out refinance
Borrowers can take cash out of their homes at the same time they combine first and second mortgages into a single low-cost VA loan. That’s true even if the current mortgages aren’t VA loans.
For example, let’s say a veteran purchased a home with an FHA loan, then later got a second mortgage from a local bank. The VA-eligible homeowner can now pay off both loans, eliminate mortgage insurance, and consolidate the two loans into one.
If there is cash left over, the homeowner can cover medical bills, handle a family emergency, start a business, pay off high-interest short-term loans and credit cards, or use the cash for almost any other purpose.
Begin your VA loan refinance. Start hereAlternatives to VA refinance cash-out loans
If a VA cash-out refi isn’t the best fit, here are some alternative options to consider:
- Conventional cash-out refinance: Although these may come with higher interest rates and stricter qualification criteria, they don’t require military service. You might also find some low-cost options through FHA programs.
- Home equity loans: These loans allow you to access the equity in your home with a fixed interest rate, giving you a lump sum of money upfront. However, home equity loans aren’t backed by the VA.
- VA Streamline Refinance (IRRRL): For those with an existing VA mortgage, this streamlined process can help reduce your interest rate and monthly payments.
- Home Equity Line of Credit (HELOC): A HELOC is a revolving line of credit secured by your home’s equity. You borrow and repay as needed, usually with variable interest rates.
FAQ: VA cash-out refi
Below are the most commonly asked questions about the VA cash-out refinance program.
Verify your VA cash-out refinance eligibilityDoes VA allow cash-out refinancing?
Yes. As long as you are eligible for a VA mortgage and have enough home equity, VA allows cash-out refinancing to access your home’s cash value. You can also use the VA cash-out loan to switch from a non-VA mortgage into a VA loan with or without cash back.
A VA cash-out refinance loan replaces your existing VA mortgage with a new VA loan. If you want cash-back at closing, you can take out the new loan for a larger amount than your existing loan, and receive the difference in cash. Keep in mind, VA cash-out refinance rates can vary based on the amount of equity you borrow and your credit score.
A VA cash-out refinance is a good idea for two types of people. Either you want to refinance your current VA mortgage and get cash back at closing, or you have a non-VA mortgage that you want to refinance into a VA loan. For current VA loan holders who do not need cash back at closing, the VA Streamline Refinance is usually a better choice.
You can obtain a VA refinance cash-out loan for up to 100 percent LTV, plus the VA funding fee. For instance, if a veteran’s home appraises at $100,000 and they pay a 2.15 percent funding fee, their total loan amount can be up to $102,150. Veterans and service members can also add the cost of energy-efficient improvements to the total, even if that raises the loan amount above the full value of the home.
A Type 2 VA cash-out refinance means your new loan amount is larger than the loan being refinanced; this is a loan where you actually receive cash-back. A Type 1 VA cash-out refinance means your new loan amount is equal to or less than your existing loan; this might be the case if you are refinancing a non-VA mortgage to a VA mortgage and do not want cash back at closing.
Upfront closing costs for refinancing are typically 2 to 5 percent of the loan amount. VA loans are unique because the lender’s origination fee can’t be more than 1 percent of the loan amount. Most homeowners use some of their cash-back to pay closing costs so they don’t have to pay out of pocket.
VA cash-out refinancing usually takes about as long as a standard mortgage: 40 to 55 days on average. That’s because a VA refinance cash-out loan requires full underwriting — meaning the lender has to take all the same steps it would for a home purchase loan, including a home appraisal, credit report, and full documentation. By comparison, an IRRRL requires fewer documents and can often close in less than a month.
For first-time use, the VA funding fee is equal to 2.15 percent of the loan amount. That includes non-VA loan holders using the cash-out refinance to switch into a VA loan. If you’ve used your VA home loan benefit before, the funding fee will be 3.3 percent.
A VA Streamline Refinance usually doesn’t require an appraisal — or bank statements, pay stubs, W2s, or tax returns. However, it is available only if you have a VA loan currently and you don’t need cash at closing. VA cash-out is the only VA refinance program that allows you to cash out your home’s equity and refinance out of any loan type.
Yes. These loans are available up to 100 percent of the home’s current appraised value. To establish the current home value, a new appraisal is required.
No. The property on which the VA loan is used must be the borrower’s primary residence.
Yes. A VA cash-out loan can pay off and refinance any loan type, including an FHA, USDA or conventional loan with a fixed or adjustable rate. You can use this refi program to get out of a loan with a high rate or one that has mortgage insurance.
Yes. A VA cash-out refinance loan can pay off any loan, provided you are VA-eligible and meet cash-out mortgage requirements.
There are no restrictions on what you use the cash for. The VA lending handbook says cash can be used for “any purpose acceptable to the lender.” That said, some uses for your cash-out refinance are wiser than others. Using cash-out funds for a purpose like paying off high-interest debt, making home improvements or even covering educational expenses can be very smart and save you a lot of money in the long run.
Texas imposes strict home equity loan laws that limit cash-out financing to 80 percent loan-to-value. Texas law supersedes the VA’s 100 percent financing guideline for cash-out loans. If you were turned down, it may have been because you had less than 20 percent equity in your home.
VA cash-out refi rates are typically lower than those for a similar conventional or FHA refinance. But remember, rates always depend on the borrower. If someone wants to get a VA loan but has very high debts and low credit, their rate will likely be higher than current average VA rates.
Yes, but several other factors also affect the amount of your mortgage payments. For example, refinancing to a shorter loan term could increase your monthly mortgage payments. But you’d be paying less interest over the life of the loan. If you’re refinancing an existing VA loan simply to reduce your mortgage payments, consider the IRRRL Streamline loan first.
Yes, the VA allows homebuyers and refinancers to buy down their interest rate with discount points. But buying points makes sense only if you stay in the mortgage long enough. If you sell or refinance again too soon you won’t recoup the upfront cost of the points.
Lenders can offer low-cost loans through the VA lending program because the Department of Veterans Affairs provides a guaranty for part of your loan’s value. The lender would be compensated if you couldn’t repay the loan. Conventional loans don’t offer this guaranty, and thus need to charge expensive private mortgage insurance (PMI) to protect lenders from financial loss.
If you have an eligible service history and decent credit, there’s a good chance you qualify for the VA cash-out program. Check with a mortgage lender to determine your eligibility and see how much cash you can take out.
A cash-out refinance VA loan will use a portion of your available VA entitlement. However, as you make payments on the new loan, your entitlement will be restored over time, potentially enabling you to utilize it again in the future.
Compare VA cash-out refinance rates
Ready to tap into your home’s equity? Before you commit, it’s important to compare VA cash-out refinance rates with different lenders.
Understanding VA cash-out guidelines will also help you navigate the process smoothly.
Take the first step toward securing a competitive VA cash-out loan by comparing personalized offers. Click below to get started!
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