VA Cash-Out Programs
VA Cash-Out Refinance Programs
Your home may be one of your largest financial assets. A VA Cash-Out Refinance can allow eligible Veterans to replace an existing mortgage with a new VA-backed loan and, when sufficient equity is available, access a portion of that equity as cash.
VA's national Cash-Out refinance rules can permit qualifying loans up to 100% of the property's VA-appraised reasonable value.
That does not mean you automatically receive 100% of your home's value in cash.
Your existing mortgage and other liens must first be paid from the new loan. Applicable closing costs and any financed VA funding fee can also reduce the amount of cash available.
Individual lenders may also establish maximum loan-to-value limits that are lower than VA's maximum.
How Much Equity Do You Have?
Home equity is generally the difference between your property's current value and the mortgage debt secured by the property.
Simple Example
If a home appraises for $500,000 and the existing mortgage balance is $300,000, there is approximately $200,000 of gross equity before considering the new loan structure, other liens, closing costs, funding fee, and lender loan-to-value requirements.
The amount you may actually receive at closing can therefore be significantly less than the home's total equity.
Veterans choose Cash-Out refinancing for many different reasons. VA guidance generally does not restrict cash proceeds to one particular use once the transaction otherwise qualifies.
Home Upgrades
Remodel living areas, update flooring, improve landscaping, add usable space, or make other desired improvements.
Repairs
Address roofing, HVAC, plumbing, electrical, structural, or other needed repairs.
New Kitchen or Bathroom
Available equity may help fund major kitchen, bathroom, or other remodeling projects.
School or Education Expenses
VA specifically identifies education costs as one potential reason homeowners access equity through Cash-Out refinancing.
Pay Down Higher-Cost Debt
Some homeowners use Cash-Out proceeds to eliminate credit-card, installment, or other higher-cost debt.
Pay Off a Second Mortgage
A VA Cash-Out refinance may potentially pay off recorded second mortgages or other eligible liens as part of the new first mortgage.
Consolidate Monthly Payments
Combining qualifying obligations into the new mortgage can reduce the number of monthly payments and, in some situations, lower total monthly obligations.
Other Financial Needs
Cash received from an eligible VA Cash-Out refinance may generally be used for other financial needs after closing.
Debt Consolidation Can Help Monthly Cash Flow - But Compare the Long-Term Cost
Paying off higher-rate debt through a mortgage can substantially change monthly cash flow.
But credit cards and other unsecured obligations become debt secured by your home when incorporated into a mortgage. Extending debt over a longer mortgage term can also increase the total interest paid even when the new interest rate is lower.
We can compare your current payments and balances with the proposed mortgage so you can see both the monthly savings and long-term effect.
A VA Cash-Out refinance is not a streamlined IRRRL.
VA requires full credit underwriting for Cash-Out refinances.
The lender will review your qualifying income, employment when applicable, debts, credit history, residual income, existing mortgage, property information, and other underwriting factors.
You must satisfy both applicable VA requirements and the lender's underwriting requirements.
Unlike a standard VA Streamline refinance, a Cash-Out refinance requires a VA appraisal.
The appraisal establishes the property's VA reasonable value, which is important because the new loan amount and available equity depend on that value.
An estimated online value or homeowner estimate is useful for an initial conversation, but the final loan structure must rely on the acceptable valuation required for the transaction.
What Does "Up to 100% Loan-to-Value" Actually Mean?
Under national VA rules, a qualifying Cash-Out refinance can potentially reach 100% of the property's reasonable value.
100% LTV Does Not Mean 100% of the Home Value Goes Into Your Pocket
If the new mortgage reaches the permitted maximum loan-to-value, the existing mortgage payoff and other amounts included in the transaction are deducted before determining the cash that can be delivered to you.
VA requires Cash-Out refinance transactions to pass an applicable Net Tangible Benefit test.
In other words, the refinance needs to provide a recognized benefit rather than simply replacing one mortgage with another without justification.
Depending on the transaction, qualifying benefits can include factors such as reducing the interest rate, shortening the loan term, eliminating mortgage insurance, accessing home equity, or satisfying another applicable VA benefit standard.
We will review your existing mortgage and proposed new loan so you can understand what changes and why the refinance is being considered.
The VA funding fee applies to a Cash-Out refinance unless the borrower qualifies for an exemption.
Under the current VA funding-fee schedule, the Cash-Out refinance fee is:
First use of the VA benefit: 2.15%
After first use: 3.30%
Many Veterans refinancing an existing VA mortgage will fall into the subsequent-use category, although the actual funding-fee status depends on the Veteran's prior VA home-loan benefit use.
The funding fee can generally be financed into the loan, subject to applicable maximum loan-to-value requirements.
Qualifying Service-Connected Disability Can Eliminate the Funding Fee
Veterans receiving VA compensation for a service-connected disability, or who are eligible to receive such compensation but are receiving retirement or active-duty pay instead, are among the borrowers who may qualify for a VA funding-fee exemption.
Other VA-defined exemption categories also exist.
When the borrower qualifies for the exemption, the VA funding fee is 0%.
One major difference between a VA Cash-Out refinance and an IRRRL is that a Cash-Out refinance does not require the existing first mortgage to already be VA-backed.
An eligible Veteran may potentially refinance an existing conventional, FHA, USDA, or other qualifying mortgage into a VA-backed mortgage.
Cash does not necessarily have to be taken from the property for VA to classify the transaction under its Cash-Out refinance rules.
There Must Generally Be Existing Mortgage Debt or Another Recorded Lien to Refinance
VA's Cash-Out program is a refinance program. Current VA guidance states that a property without an existing mortgage or other lien of record is not eligible for a VA-guaranteed Cash-Out refinance.
If you own the property free and clear, talk with us so we can review what other financing options may be available.
VA Cash-Out Occupancy Requirement
VA Cash-Out refinancing has a different occupancy requirement from an IRRRL.
You Must Intend to Occupy the Property as Your Home
VA requires the Veteran to meet its occupancy requirement for a VA Cash-Out refinance.
This is different from an IRRRL, where prior occupancy can often satisfy the VA occupancy requirement.
What If Your Existing Mortgage Is Already a VA Loan?
When a VA Cash-Out refinance is replacing an existing VA-guaranteed mortgage, VA seasoning requirements apply.
The specific seasoning test differs somewhat depending on how VA categorizes the Cash-Out refinance, but current rules generally involve both the age of the existing VA loan and a required payment history.
VA-to-VA Cash-Out Transactions Have Seasoning Rules
VA's current handbook requires applicable VA-to-VA Cash-Out transactions to satisfy its seasoning requirements before the new refinance closes.
Cash-Out refinances of a non-VA mortgage do not use the same VA-to-VA seasoning requirement.
Important Information for Texas Homeowners
TEXAS HOMESTEAD CASH-OUT RULES ARE DIFFERENTThe national VA Cash-Out program can permit qualifying financing up to 100% of VA reasonable value, but a Texas homestead equity transaction is subject to the separate requirements of Article XVI, Section 50(a)(6) of the Texas Constitution.
Texas law generally limits the principal balance of a home-equity transaction, together with other debt secured by the homestead, to 80% of the home's fair market value.
Because Texas home-equity law does not operate the same way as the national VA Cash-Out program, the national 100% VA equity cash-out structure should not be assumed to be available on a Texas homestead.
If your goal is to take cash from a Texas homestead, contact VA Help Center at (801) 871-3739. We can review the alternative cash-out financing options available for your particular transaction.
We can start with your estimated home value and current mortgage balances to calculate a preliminary range.
The final amount depends on:
- The final VA-appraised value
- Your existing first-mortgage payoff
- Any second mortgage or other recorded liens being paid
- The lender's maximum permitted loan-to-value
- Your qualifying income and debts
- Your credit profile
- The VA funding fee, if applicable
- Closing costs and prepaid items
- Applicable state-law restrictions
Give us your approximate home value and current mortgage balance and we can help estimate how much equity may potentially be available before you begin the full loan process.
Consider More Than Just the Amount of Cash
New Interest Rate
Your existing mortgage rate may be different from the rate available on the new Cash-Out refinance.
New Monthly Payment
Taking additional cash increases the mortgage balance and can affect the required monthly payment.
New Loan Term
Restarting or extending the mortgage term can lower a payment while increasing the number of years interest is paid.
Total Long-Term Cost
Compare the amount of cash received with the costs, new mortgage balance, interest rate, term, and total expected repayment.
How a VA Cash-Out Refinance Works
The largest cash amount is not automatically the best refinance.
We want to compare how much cash you need with the new loan balance, interest rate, mortgage payment, closing costs, funding fee, and long-term cost.
Tell us what you want the funds for and approximately how much you need. VA Help Center can help determine whether a VA Cash-Out refinance or another available financing option fits your goal.
Common VA Cash-Out Questions
Can a VA Cash-Out refinance go to 100% of my home's value?
VA's national program can permit qualifying Cash-Out refinances up to 100% of the property's VA-appraised reasonable value. Individual lenders may establish lower limits, and state law may impose additional restrictions.
Does that mean I receive 100% of the home's value in cash?
No. The existing mortgage and other liens must first be paid. Applicable closing costs and any financed VA funding fee also affect the amount of cash available.
Can I use VA Cash-Out funds for home improvements?
Yes. VA specifically identifies home improvements as one common use of Cash-Out refinance proceeds.
Can I use the money to pay credit cards or other debt?
Yes. Paying off other debt is one recognized use of VA Cash-Out proceeds. Consider the total cost carefully because debt that may previously have been unsecured becomes part of a mortgage secured by your home.
Can I pay off a second mortgage?
Potentially yes. VA Cash-Out refinance rules allow the refinancing of recorded liens, including an eligible second mortgage, subject to applicable VA and lender requirements.
Does the existing mortgage have to be VA?
No. An eligible non-VA mortgage may potentially be refinanced into a new VA-backed loan through the VA Cash-Out refinance program.
Do I have to take cash just because VA calls it a Cash-Out refinance?
No. VA's Cash-Out refinance rules also cover certain transactions where an eligible non-VA mortgage is refinanced into VA financing without the borrower necessarily taking equity cash.
Do I have to qualify again?
Yes. VA requires full credit underwriting for Cash-Out refinance loans. The lender reviews income, credit, debts, residual income, property information, and other applicable qualification factors.
Is an appraisal required?
Yes. A VA appraisal is required to establish the property's reasonable value for the Cash-Out refinance.
Will I pay another VA funding fee?
A VA funding fee generally applies unless you qualify for an exemption. The current Cash-Out funding-fee schedule is 2.15% for first use and 3.30% after first use.
Does a VA disability automatically remove the funding fee?
Borrowers who meet VA's funding-fee exemption requirements do not pay the fee. This includes Veterans receiving VA compensation for a service-connected disability and certain other VA-defined exemption categories.
Can I do a VA Cash-Out refinance on a home I own free and clear?
Current VA guidance treats Cash-Out as a refinance of existing mortgage debt or another lien of record. A property without an existing mortgage or recorded lien generally is not eligible for VA-guaranteed Cash-Out refinancing.
Can I Cash-Out refinance an investment property?
VA Cash-Out refinancing requires the Veteran to meet VA occupancy requirements. This differs from an IRRRL, which can permit prior occupancy in qualifying circumstances.
Is VA Cash-Out different in Texas?
Yes. Texas homestead equity transactions are subject to Article XVI, Section 50(a)(6) of the Texas Constitution. Among other requirements, total debt secured by the homestead is generally limited to 80% of fair market value. Contact VA Help Center so we can review the financing structures available for your particular Texas transaction.
Find Out How Much Equity May Be Available
Give us your estimated home value, current mortgage balance, and the amount of cash you would like to receive. VA Help Center can help you review the potential equity, qualification requirements, and available refinance options.
CHECK MY CASH-OUT OPTIONS Call 801-871-3739VA Help Center, LLC is a private mortgage company and is not affiliated with, endorsed by, or acting on behalf of the U.S. Department of Veterans Affairs or any other government agency.
VA Cash-Out refinance availability, maximum loan amount, cash proceeds, loan-to-value, interest rate, monthly payment, appraisal, credit and income requirements, residual income, occupancy, entitlement, seasoning, net tangible benefit, funding fee, closing costs, and other terms are subject to applicable VA requirements, lender guidelines, property value, state law, borrower qualification, and applicable law.
VA's maximum permitted loan-to-value does not guarantee that a lender will approve a loan at that maximum. Individual lenders may establish more restrictive loan-to-value, credit, underwriting, or loan amount requirements.
Funding-fee exemption eligibility is determined under VA requirements. Not every disability status automatically establishes an exemption.
Refinancing may increase the total finance charges paid over the life of the loan. Using home equity to pay unsecured debt converts that obligation into debt secured by the borrower's home and may extend the period over which the debt is repaid.