What Is a VA Cash-Out Refinance?
The VA cash-out refinance lets eligible veterans tap home equity for any purpose — and can even convert a non-VA loan into a VA-guaranteed mortgage. Here’s exactly how it works.
What Is a VA Cash-Out Refinance?
A VA cash-out refinance replaces your existing mortgage (VA or non-VA) with a new VA-guaranteed loan for a higher amount — giving you the difference in cash. Unlike the VA IRRRL, this is a full-documentation loan requiring income verification, a full credit review, and a new VA appraisal.
Two Types of VA Cash-Out Refinance
| Type | What It Does | Max LTV |
|---|---|---|
| Type I — No Net Cash | Converts non-VA loan (FHA, conventional) to VA; new loan does not exceed existing payoff | 100% |
| Type II — Cash to Veteran | New loan exceeds payoff — difference paid to veteran in cash for any purpose | 90% |
Key Requirements
| Requirement | Details |
|---|---|
| Occupancy | Veteran must currently occupy the property as primary residence |
| Listing status | Property must not be listed for sale — must be off market for at least 6 months prior to application |
| Seasoning — payments | At least 6 full payments made on existing loan from first payment due date |
| Seasoning — time | New note date must be at least 210 days after first payment due date of existing loan |
| Appraisal | Full VA appraisal required on all cash-out transactions |
Funding Fee — Cash-Out Refinance
| Use | Funding Fee |
|---|---|
| First-time use | 2.15% |
| Subsequent use | 3.30% |
| Exempt (service-connected disability) | 0% |
Thinking About Tapping Your Home’s Equity?
California home values have appreciated significantly. A VA cash-out refinance may let you access that equity at a lower rate than a HELOC or personal loan. At Lendia, we’ll show you how much equity is available and what your new payment would look like.
A worked example (illustrative example, not a quote)
Assume a home appraised at $800,000 with $450,000 owed. For a Type II loan at the 90% LTV cap shown above, the maximum new loan is $800,000 x 0.90 = $720,000. The difference from the payoff is $270,000 before costs. The first-use funding fee at 2.15% on a $720,000 loan is $15,480, so the cash you actually receive is lower once the fee and closing costs are paid. A Type I loan on the same home would stay at or below the $450,000 payoff and simply swap a non-VA loan into a VA one.
Planning how to use the cash
- Debt consolidation: compare the new, larger payment against the payments you would eliminate.
- Home improvements: plan the budget, since a VA appraisal values the home as it is when the loan is made.
- Buying out a co-owner: talk to your attorney about the documents needed at closing.
The refinance replaces your whole first mortgage, so any low rate you hold today is replaced too. If you want only a lower rate and no cash, the IRRRL is usually a better match. If you are weighing tax effects, consult a tax professional.
Common mistakes
- Leaving the home listed for sale, which blocks the application until it has been off the market for at least six months.
- Ignoring seasoning. Six payments and 210 days apply here too.
- Borrowing the maximum without checking the new payment against your budget and residual income.
- Assuming single-wide manufactured homes qualify; they may not for cash-out.
Frequently asked questions
How is this different from a HELOC?
A VA cash-out replaces your first mortgage with one new loan. A HELOC is a separate second line of credit that leaves your first mortgage in place, so the two work very differently with your existing rate.
Can I do a cash-out if I have moved out?
The occupancy requirement says you must currently live in the home as your primary residence, so a home you have already moved out of generally will not qualify.
Does the cash I receive count as income?
No. Proceeds from a loan are not income. Discuss any tax questions with a tax professional.