VA Cash-Out Refinance Guide (2026)

The VA cash-out refinance is a full new VA-guaranteed loan under 38 U.S.C. 3710(a)(5), which lets a veteran refinance any lien on a home the veteran owns and occupies. VA's page gives it 2 jobs: take cash out of your equity for debt, school, home improvements or anything else, or refinance a non-VA loan into a VA-backed loan. Unlike the VA IRRRL streamline, it is underwritten like a purchase, with a VA appraisal and a full credit and income review.

VA's lender guidance, starting with Circular 26-19-05, sorts these loans into 2 types by 1 test: is the new loan, funding fee included, bigger than the payoff of the old loan?

• Type I: the new loan, including the funding fee, does not exceed the payoff. No cash; this is how a conventional or FHA loan usually moves to VA.
• Type II: the new loan, including the funding fee, exceeds the payoff. The true cash-out.

The regulation, 38 CFR 36.4306, does not use the labels; it makes the same split between a new loan "equal to or less than the payoff amount" and one that "exceeds the payoff amount," and hangs different tests on each. To choose between all VA refinances, start with the VA refinance options guide.

VA's cash-out page sets 3 conditions, and all must be true:

• You qualify for a VA-backed home loan Certificate of Eligibility (COE), and
• you meet VA's and your lender's standards for credit and income, and
• you will live in the home you are refinancing.

Occupancy is stricter than the IRRRL. 36.4306(d) requires that you own and occupy the home, or will reoccupy it after major repairs, or that your spouse occupies it while active duty keeps you away. A former residence you now rent does not qualify.

COE. VA's COE page lists 3 routes: online, through the lender's Web LGY system, or by mail with VA Form 26-1880. The Certificate of Eligibility guide covers the paperwork.

Credit and income. VA's page names no credit score; the net tangible benefit rule points to VA's residual-income standard in 38 CFR 36.4340. Lenders add their own score floors and debt-to-income caps, so a denial at one lender is not a VA denial. VA's document list matches a purchase: COE, 30 days of pay stubs, 2 years of W-2s, and usually 2 years of tax returns.

Appraisal. The lender orders a VA appraisal; the Notice of Value sets the "reasonable value" every percentage below is measured against. The fee follows VA's schedule for your state. The property requirements guide covers what the appraiser checks.

36.4306(a)(1) sets the ceiling: the new loan may not exceed 100% of the reasonable value of the home. The funding fee may be financed inside that ceiling, but any part of it that would push the loan over 100% must be paid in cash at closing. On a $400,000 home the most VA will guarantee is $400,000, fee included.

Two other limits:

• Loan limits. VA's page says a no-down-payment loan can run up to the conforming limit in most areas, more in high-cost counties; this bites only with reduced entitlement (see the 2026 VA home loan limits post).
• The 90% reality. Most lenders will not write a VA cash-out above 90% loan-to-value (LTV), and the reason is not VA. Ginnie Mae's MBS Guide, Chapter 24 defines a "High LTV VA Cash-Out Refinance Loan" as one above 90% LTV at origination that converts any equity to cash, and bars those loans from its standard Ginnie Mae I and multiple-issuer Ginnie Mae II pools. A lender that cannot pool the loan must hold it, so most stop at 90%. Ask before you count on the last 10%. A no-cash Type I loan is outside Ginnie Mae's definition, so a conventional-to-VA refinance at 95% LTV can still find a lender.

38 U.S.C. 3709 and 36.4306 apply 3 tests; which ones bite depends on the type.

Net tangible benefit (every cash-out). 36.4306(a)(3) requires the lender to run a net tangible benefit test, and the loan must satisfy at least 1 of 8 items:

1. It eliminates monthly mortgage insurance, public or private, or monthly guaranty insurance.
2. The new term is shorter.
3. The new interest rate is lower.
4. The new payment is lower.
5. Your monthly residual income goes up (36.4340(e)).
6. It refinances an interim construction loan on your primary home.
7. The new loan is at or under 90% of reasonable value.
8. It converts an adjustable-rate mortgage to a fixed rate.

One item is enough. A loan at 90% LTV passes on item 7 even if the rate and payment both go up, so the test protects you less than it sounds.

Seasoning (VA-to-VA only). If the loan being refinanced is a VA loan, the new loan cannot be guaranteed until the later of 210 days from your first monthly payment and the date you make the 6th monthly payment. 36.4306(c)(2) applies this to Type II loans "only when the loan being refinanced is a VA-guaranteed or insured loan." An FHA or conventional loan faces only the lender's seasoning rule.

Recoupment and rate tests (Type I VA-to-VA only). When the old loan is VA and the new amount is at or below the payoff, 36.4306(b) adds the IRRRL-style tests: all fees and costs (other than taxes, escrow and the funding fee) must be recovered through lower payments within 36 months, a fixed-to-fixed loan needs a rate at least 50 basis points lower, and fixed-to-ARM at least 200 basis points lower. For a Type II loan, 36.4306(c)(1) deems recoupment met once the net tangible benefit rules are satisfied. The math is on the IRRRL streamline page.

Watch out: A Type II cash-out skips the recoupment and rate-drop tests, so a lender can offer a higher rate than you have now and it is still a legal VA loan. The disclosure below is your only built-in warning.

Source: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/, effective April 7, 2023; https://www.ecfr.gov/current/title-38/chapter-I/part-36/subpart-B/section-36.4306.

The percentages took effect April 7, 2023 and still apply in 2026. The 3.3% rate applies on every use after the first, including a cash-out of a home you bought with a VA loan. On a $360,000 loan that is $7,740 at 2.15% or $11,880 at 3.3%, against $1,800 for an IRRRL of the same size.

Exemptions. Under 38 U.S.C. 3729(c) and VA's page, you pay no fee if you receive VA compensation for a service-connected disability, or would but for retirement or active-service pay; if you are a surviving spouse receiving Dependency and Indemnity Compensation (DIC); if you have a proposed or memorandum rating before closing; or if you are on active duty with a Purple Heart. If compensation is later granted with an effective date before closing, you can ask for a refund. Deductibility is in the VA funding fee tax deduction post.

Other closing costs. 38 CFR 36.4313(d) lists what you can be charged: the VA appraisal, credit report, recording fees, title examination and insurance, a survey if required, a flood determination, prepaid taxes and insurance, and the lender's flat charge of up to 1% of the loan in place of every other origination fee. VA publishes no typical total. Escrow is set up again at closing; the property taxes and insurance costs guide and the home insurance benefits guide cover what feeds it.

Disclosures you must be handed twice. 36.4306(a)(3) requires the lender to give you, in a standardized format, within 3 business days of application and again at closing, a comparison of the old and new loans on 6 points: payoff amount, loan type, interest rate, term, total paid over the life of each loan, and LTV before and after. It must also state in dollars how much home equity the refinance removes and that this may affect your ability to sell later. You certify receipt both times.

This is the most common use and often involves little or no cash. VA's page lists refinancing a non-VA loan into a VA-backed loan as a purpose of the cash-out loan, and eliminating monthly mortgage insurance is the first item on the net tangible benefit list.

Why it pays: a conventional loan above 80% LTV carries private mortgage insurance (PMI) until, per the CFPB, you request cancellation at 80% of original value or the servicer cancels it at 78%; FHA loans have their own insurance rules. A VA loan has no monthly mortgage insurance at any LTV. So a veteran with an FHA loan at 92% LTV can refinance into a VA Type I loan, drop the monthly insurance, and pass the test on item 1 even at the same rate.

Weigh the funding fee first: on first use, 2.15% is the price of removing the insurance. If you are exempt, the comparison is usually not close. The VA home loan guide covers the rest of the program.

1. Confirm the seasoning date if your current loan is VA: 210 days from the first payment and 6 monthly payments, whichever is later.
2. Get your COE online, through your lender's Web LGY system, or by mail with VA Form 26-1880.
3. Get at least 2 Loan Estimates. Compare the rate, the lender's 1% charge, the funding fee line and the cash-to-you figure.
4. Provide documents: COE, pay stubs, W-2s and tax returns.
5. Pay for the VA appraisal. The Notice of Value fixes your reasonable value and so your maximum loan.
6. Read the initial comparison disclosure, due within 3 business days of application, including the home-equity-removed figure.
7. Review the Closing Disclosure and the final comparison, certify receipt, and close.

Questions about entitlement or your COE go to VA's home loan line at 877-827-3702, Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.

Every figure below except the funding fee, the LTV rules and the net tangible benefit test is an assumption. Run your own in the VA loan rate estimator.

Assumptions. Your home appraises at $400,000. You owe $250,000 on a VA loan at 6.0% with 25 years left, so you pay $1,610.75 in principal and interest. You have used your benefit before, so the fee is 3.3%. Closing costs are $8,000; the new loan is a 30-year fixed at 6.5%.

Source: funding fee from https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/, effective April 7, 2023; LTV rule from https://www.ecfr.gov/current/title-38/chapter-I/part-36/subpart-B/section-36.4306; value, rates, balance and closing costs are assumptions for illustration.

What the example shows.

• The fee is real money. Almost $12,000 of equity goes to the funding fee at 90% LTV. If you were exempt, cash at 90% would be $102,000.
• The 100% column may not be a legal loan. With a higher rate and payment, it fails items 2, 3, 4, 7 and 8 of the net tangible benefit test and passes only if paying off other debt raises your residual income (item 5). At 90% LTV, item 7 passes on its own.
• Your payment rises $664.69 a month. Part is the extra $110,000 you borrowed; part is the half-point rate increase on the $250,000 you already owed. A HELOC would have left the $250,000 at 6.0%.

Source: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/, effective April 7, 2023; HELOC terms are set by the lender, not VA.

Cash-out wins when the new first-mortgage rate is at or below your current rate, when it removes mortgage insurance, or when you are fee-exempt. A HELOC or home-equity loan wins when your current rate is well below today's and you need a smaller sum. An IRRRL wins when you have a VA loan and only want a lower rate; it allows no cash (see the IRRRL streamline guide).

When not to cash out. Leave the equity alone if the cash pays off revolving debt you may run up again; if the new rate is higher than your current one and there is no other real benefit; if you plan to sell within a few years, because the fee and costs come out of your sale proceeds; or if the lender's only argument is "you can borrow 100%." That is why the disclosure has an equity-removed line.

A cash-out refinance re-sets your escrow, and most states exempt some or all property tax for veterans with a service-connected disability. A few states run their own veteran home-improvement loans that can beat a 3.3% fee for small sums. Select your state to see what applies.

How much cash can I get from a VA cash-out refinance?

Under 38 CFR 36.4306 the new loan may not exceed 100% of the home's reasonable value; your cash is that ceiling minus the payoff, closing costs and funding fee. Most lenders cap the new loan at 90% loan-to-value because Ginnie Mae will not pool VA cash-out loans above 90% in its standard securities.

How soon can I do a VA cash-out refinance?

If the loan being refinanced is a VA loan, 38 CFR 36.4306 bars the guaranty until the later of 210 days from your first monthly payment and the date you make the 6th monthly payment. The seasoning rule does not apply when the loan being refinanced is FHA or conventional.

Can I refinance an FHA or conventional loan into a VA cash-out?

Yes. VA's cash-out page lists refinancing a non-VA loan into a VA-backed loan as a purpose of the loan, whether or not you take cash. Eliminating monthly mortgage insurance is the first item on VA's net tangible benefit list.

What is the funding fee on a VA cash-out refinance?

2.15% of the loan on first use of your benefit and 3.3% on each later use, effective April 7, 2023. Veterans receiving compensation for a service-connected disability, surviving spouses receiving DIC and active-duty Purple Heart recipients pay nothing.

Is a VA cash-out refinance better than a HELOC?

It usually wins when the new first-mortgage rate is also lower than your current one or it removes mortgage insurance. When your current rate is low, a HELOC keeps that rate on the big balance with no funding fee; the cash-out resets the whole balance at today's rate plus 2.15% or 3.3%.