Homeownership isn’t just about where you live; it’s something you’ve worked hard to build. A VA Cash-Out refinance gives eligible Veterans a way to tap into that equity and turn it into cash.
Whether you’re looking to free up funds for home improvements, pay off debt or create more financial breathing room, this VA refinance option can offer the flexibility you need to move forward with confidence.
What is a VA Cash-Out Refinance?
A VA Cash-Out refinance is a loan that allows qualified Veterans to refinance their VA or non-VA loan and take cash out from their home’s equity. At closing, you’ll receive the equity you’re taking out as a lump sum of cash.
This isn’t a second loan like a home equity loan or home equity line of credit (HELOC). Instead, it replaces your existing mortgage with a new VA-backed loan. This new loan will likely have updated loan terms, including a new interest rate and monthly payment.
There are two types of VA Cash-Out refinances: A rate and term cash-out is when a borrower replaces a non-VA loan with a VA loan without receiving any cash back at closing, and a true VA Cash-Out refinance allows the borrower to tap into their home equity and receive cash from the refinance.
Many Veterans also use a VA Cash-Out to refinance into a lower rate, switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage or eliminate costly mortgage insurance they might be paying with another type of loan.
According to the most recent Home Mortgage Disclosure Act (HMDA) data, 71,394 Veterans used the VA Cash-Out refinance in 2024, 13.6% more than the previous year. It’s a flexible option that can help Veterans use their hard-earned equity in a way that aligns with their financial goals.
VA Cash-Out Refinance Rates
Interest rates for a VA Cash-Out refinance can vary based on a few key factors such as market trends, lender guidelines and your overall financial profile. While these VA Cash-Out rates may be a bit higher than those for VA purchase loans or VA Streamline refinances, they’re still typically lower than what you’d find with many conventional loan options.
Current VA Cash-Out Rates
VA loan rates change daily based on market conditions. See current VA loan rates for each VA loan type below.
| VA Loan Type | Interest Rate | APR | Points |
|---|---|---|---|
| 30-Year VA Cash-Out Refinance | 6.500% | 6.813% | 0.1250 ($368.75) |
| 30-Year VA Cash-Out Jumbo Refinance | 6.125% | 6.454% | 0.3750 ($2874.57) |
Unlock the equity in your home. Learn more about VA cash-out refinancing options.
VA Cash-Out Refinance Requirements
Lenders will document credit, income, employment and assets for homeowners seeking a VA Cash-Out refinance. Guidelines and requirements for minimum credit score, maximum debt-to-income ratio, derogatory credit and more can vary by lender.
The common credit benchmark for a VA Cash-Out refinance is often a 620 minimum.
Additional requirements can include:
- Meeting the VA's service requirements
- Certifying that you intend to occupy the property as your primary residence
- Meeting the lender's loan-to-value (LTV) requirements
- Breaking even on the cost to refinance within a reasonable time frame
- Getting a clear financial benefit from the refinance
Lenders may also have seasoning requirements for VA Cash-Out refinancing, which refers to the length of time the mortgage existed.
At Veterans United, homeowners must have made six consecutive monthly payments on their current loan, and the note date on the VA Cash-Out refinance must be at least 210 days after the original loan's first monthly payment due date
We also require some documentation, including a copy of your original loan note or final Closing Disclosure, your most recent mortgage statement and a verification of mortgage (VOM). If you can’t provide a standard VOM, we may accept other proof showing six on-time monthly payments in a row.
Homeowners in Texas may encounter more restrictions regarding VA Cash-Out refinance loans. Also, refinancing may result in higher finance charges over the life of the loan.
VA Cash-Out Loan-to-Value (LTV) Requirements
The VA allows qualified Veterans to refinance with a loan-to-value ratio up to 100%. But lenders will often cap LTV at 90% in most cases. That limit also includes the VA Funding Fee if applicable.
For example, let's say you have a loan balance of $200,000, and your home appraises for $400,000.
The LTV math looks like this:
- 90% of $400,000 = $360,000
- $360,000 - 200,000 = $160,000
- $160,000 = equity you can take as cash
Homeowners can pay their closing costs and the VA Funding Fee from the proceeds of their refinance as long as they still meet LTV guidelines.
VA Cash-Out Time to Recoup Requirements
Lenders may have guidelines regarding how long it takes a borrower to break even the costs and fees of getting a VA Cash-Out refinance. The amount of time it takes for your monthly savings to cover the upfront cost of refinancing is known as the recoupment period.
In most cases, lenders look for borrowers to recoup their closing costs within 36 months. That 36-month benchmark helps show the refinance is providing meaningful financial value. If the recoupment period is longer, lenders may ask for additional documentation, and the loan file must state positive reasons to support the longer time frame, such as:
- Refinancing an adjustable-rate mortgage product into a fixed-rate mortgage
- Reducing the loan term
- Paying off high-interest debts using the cash-out funds
All VA Cash-Out refinances require a net tangible benefit like what is listed, and that includes the cash-out refinances that are not allowed to exceed 36 months of recoupment.
Lenders pay especially close attention to the recoupment period if you’re refinancing from one VA loan into another VA loan through a cash-out refinance, and the new loan amount (including the VA Funding Fee) does not exceed your current loan payoff. In this case, VA guidelines require that you recoup the costs within 36 months.
VA Cash-Out Pros and Cons
| Pros | Cons |
|---|---|
| Use home equity for cash needs | Reduces your available home equity |
| Refinance from a non-VA loan into a VA-backed loan | Increases your total loan balance |
| No private mortgage insurance (PMI) | Requires closing costs and VA Funding Fee |
| Lower rates than conventional cash-out options | May raise your monthly mortgage payment |
| Switch to a fixed rate or shorten your loan term | May extend your loan payoff timeline |
While a VA Cash-Out refinance has its trade-offs, one of its biggest advantages is the flexibility it offers. Generally, there are no restrictions on how you use the cash back, and you can use the funds in a way that best fits your needs.
Ways to Use Your Cash Back
Here are some common uses for funds from a VA Cash-Out refinance, though they’re not limited to these:
- Paying down or eliminating debts
- Making home improvements or repairs
- Covering emergency expenses
- Paying college costs
To see how a VA Cash-Out refinance might work for you, try Veterans United’s VA refinance calculator for an estimate of your total costs and savings.
Understanding Refinance Offers
Veterans should evaluate VA refinance offers closely, especially unsolicited mailers and advertisements. These often sound too good to be true, and that's because they are. Some lenders promise big benefits but hide many costs and fees in the fine print. Others won't clearly explain they're offering a riskier adjustable-rate loan.
To better understand if a VA Cash-Out refinance is right for you and your financial situation, contact the experts at Veterans United Home Loans. They can walk you through the fine print of any offer you receive and help you assess whether it's valid.
Cash-Out Refinance FAQs
Here are some of the most frequently asked questions about VA Cash-Out refinances and what to expect along the way.
What is Home Equity and How Much Do You Need to Refinance?
Home equity is the difference between your home’s value and what you still owe on your mortgage. For VA Cash-Out refinances, eligible Veterans may borrow up to 100% of their home’s value.
However, most lenders limit that to 90%, which means you’ll typically need to leave at least 10% equity in your home after the refinance. That’s more flexible than FHA or conventional cash-out loans, which often require you to keep 15% to 20% equity.
Can You Get a VA Cash-Out Refinance on a Free and Clear Property?
Veterans need to have an active mortgage on the property in order to secure a VA Cash-Out refinance. If the home is owned free and clear, this type of refinance isn’t typically an option.
How Long Do You Have to Wait to Get a VA Cash-Out Refinance?
Lenders typically require a seasoning period of at least six months, meaning you’ll need to have made six consecutive monthly payments on your current mortgage before you’re eligible to refinance. However, seasoning periods can vary by lender.
What are All the Costs Associated With VA Cash-Out Refinance?
Daily market conditions affect VA Cash-Out rates. Rates can and will vary by lender, but VA loans continue to have the lowest average fixed rate on the market.
VA Cash-Out refinance closing costs are often 3% to 5% of the loan amount and vary by lender, although the VA limits what lenders can charge. The VA sets the appraisal fee, but homeowners can shop around for the best deal on other third-party costs.
While you can't simply roll your closing costs on top of the loan like in a VA Streamline refinance, you can pay them with some of the equity you’re taking out at closing.
How Much is the VA Funding Fee on a Cash-Out Refinance?
The funding fee on a VA Cash-Out refinance is 2.15% of the loan amount for first-time VA loan users and 3.3% for those reusing their benefits. Veterans receiving VA disability income are exempt from paying this fee.
The VA Funding Fee goes directly to the Department of Veterans Affairs to help keep the loan program running.
How Long Does it Take to Close on a VA Cash-Out Refinance?
VA Cash-Out refinances typically take 45 to 60 days to close. But every homeowner's situation is different, and some cash-outs might close faster. Talk with your lender to get an accurate estimate of closing time.
What are VA Loan Equity Reserves?
Talking about VA loan equity reserves is another way of describing home equity. You may have received a letter in the mail telling you to tap into your "VA Loan Equity Reserves," which is a fancy way of saying you may be eligible for a VA Cash-Out refinance.
Are There Occupancy Requirements With a VA Cash-Out Refinance?
Yes, you must intend to live in the home as your primary residence. VA Cash-Out refinances follow the same occupancy requirements as VA purchase loans.
How Will Cash-Out Refinancing Affect My VA Entitlement?
With an IRRRL, the new loan does not require using new or additional VA loan entitlement. However, VA Cash-Out borrowers must use new or additional VA loan entitlement to secure the loan.
A VA Cash-Out refi is a new mortgage loan that repays the original VA loan in full, which allows borrowers to restore the entitlement utilized on that purchase. However, there could be additional entitlement required depending on the specific circumstances.
If you have questions about using your VA eligibility for a cash-out refinance, contact a Veterans United loan specialist today.
