VA Cash Out Mortgage Refinance

How does a VA cash out refinance work?

Cash out refinance graphicThe VA cash-out refinancing option enables Veterans to borrow up to 100% of the appraised value of their home to pay off their current mortgage. In addition to paying off the current mortgage, any additional amount of money can be used to pay off or reduce credit card balances, school loans, revolving and installment loans.

The VA cash out refinance may include closing and prepaid costs. See the example below:

Current Home Value 250,000
X 100% of home value ($250.00 X 100%) = 250,000

Less payoff, the current loan


Less closing costs and prepaid costs (estimated)

Maximum VA cash back at settlement 96,000

Borrowers are not required to obtain cash from a cash-out refinance, the term cash out also includes loans that pay off the existing mortgage and include the closing and prepaid costs into a new loan.

The Cash-Out Refinance Loan may also be used to refinance a non-VA loan into a VA loan. The VA will guarantee up to 100 percent of the value of the home.

Who is eligible for VA Cash Out Streamline Loan?

  • Active duty Service members
  • Certain surviving spouses
  • Current Guard and Reserve members (with six years of creditable service)
  • National Guard and Reserve members (called to active duty)
  • Veterans

The Veteran/Service member must have been dismissed from military duty other than dishonorably, and must have completed the length of service required by the government.

Occupancy Requirement: Along with the service and discharge requirements, the Veteran, the Veteran's spouse, or dependent child must attest the property's occupancy.

How Can I Apply for a VA Loan?

The first step is to submit an application to a VA-approved lender. As previously stated, the VA does not issue house loans to veterans; rather, it establishes lending guidelines and reimburses lenders for 25% of the loan amount in the event of a Veteran default.

What Is the Minimum Credit Score for a VA Cash Out Refinance

Believe it or not, the VA does not require a minimum credit score. The VA leaves the minimum requirements for a credit score to the lender. Some lenders, for example, will accept applicants with a credit score as low as 580, while others will need a minimum credit score of 620 for refinancing.

Prior to applying for a cash-out refinancing loan, verify your eligibility for a VA cash-out refinance with the lender.

What Is the Funding Fee for a VA Cash Out Refinance?

The VA funding fee is equivalent to 2.3 percent of the loan amount when used for the first time.

This includes Veterans who are refinancing from a FHA, USDA or conventional mortgage into a VA cash-out refinance loan.

The funding fee is 3.6 percent of the loan amount for Veterans who have already utilized their VA home loan benefit.

Animated question markFAQs About VA Cash Out Mortgage Refinance

Q. Can I do a cash-out refinance on a VA loan?
A. As mentioned earlier, the Veteran's Administration allows for a cash-out loan. The VA cash out mortgage may be up to 100%. (varies by lender). The funding fee may be added to the principal amount of the loan. Additionally, closing and prepayment fees might be rolled into the cash-out refinancing.

Q. Can I do a cash-out VA refinance?
A. The standards for a VA cash out mortgage are the same as those for a purchase mortgage. Employment stability, credit rating, and the amount of monthly debt payments are all important factors to consider. Overall, the loan conditions are comparable to those set out by the Veterans Administration (VA).

Q. Can you do a 100 VA cash out refinance?
A. The Veteran's Administration allows for 100 percent financing; however, since the lender is liable for the mortgage, some lenders may limit the amount borrowed to 90 percent of the total appraised value. Call around to several VA lenders until you locate one that will provide 100 percent financing on a VA cash out loan for your situation.

Q. Can you do a VA cash out refinance on an investment property?
A. Refinancing of investment properties is not permitted under the VA loan programs.

Q. Do I need an appraisal for a cash-out refinance?
A. Yes. Ordered through the lender.

Q. Do you require good credit for a cash-out refinance?
A. The credit score should be in the 620 to 640 range.

Q. Do you pay closing cost on cash out refinance loans?
A. Yes

Q. How does a VA cash out refinance work?
A. A VA cash out refinancing loan is similar to your initial purchase mortgage. A credit score of at least 620 will be required by the lender in order to be approved for the mortgage (some VA lenders may go lower). It is necessary to get the house appraised, since the home is the collateral for the loan. A title search and title insurance will also be required.

Q. What is a 30-year VA cash-out refinance loan?
A. The VA cash-out refinancing program allows you to replace your existing mortgage with a new mortgage that has a lower interest rate, ideally. The borrower may be eligible to borrow against the equity in their house, depending on the amount of equity they have built up.

Q. What is a type 2 VA cash out refinance?
A. A Type 2 VA cash-out loan is one in which your new loan amount is more than the balance of your current loan, resulting in a net cash-out. The cash back component of the loan is created by the disparity between the loan amounts. For example, if the appraised value is $100,000 and your current loan balance is $50,000, and you are borrowing $50,000. The new loan amount would be $100.00.

Q. What is a VA cash out refinance home equity disclosure?
A. The amount of home equity that is being withdrawn from the property as a consequence of the refinancing must be disclosed twice by the lender. The first disclosure must be made within three business days of the loan application's submission date, and a second disclosure must be made at the time of loan closing.

The home equity disclosure explains how the reduction of home equity may affect the sale or refinancing of the house in the future in the disclosure. For adequate funding, the final payout and fair value (as shown on the Notice of Value) must be utilized to establish the final disclosure at loan closing rather than projected loan payback and property value.

Q. What is the maximum loan to value (LTV) for a VA cash out refinance?
A. 100% LTV financing is permitted by the Veterans Administration, although the lender may cut the maximum loan amount.

Read more about VA loans on the questions and answer page


In conclusion, VA cash-out refinancing can be a great way to get some extra money to use for your needs. It's important to understand the process and the risks involved, so you can make the best decision for your financial situation. If you're thinking about refinancing your mortgage, be sure to consult with a qualified VA lender to learn more about your options.

SOURCE: Cash-out Refinance Loan

Recommended Reading

  1. How to get a VA loan for a manufactured home
  2. The VA One Time Close Construction Loan: How Does It Work?
  3. Credit Score for a VA Loan: What You Need to Know