VA Cash Out Refinance: Unlock Your Home’s Equity with a VA Loan

There are many ways to utilize the equity in your home to access money needed for large expenses. There might be many reasons for doing this, usually large medical bills, the need to finance home repairs, or to pay off debt. Your home is the biggest asset you likely have, and using its value to pay off these expenses has many benefits but is also not without risk. A cash out refinance loan is one such way to convert your home equity into usable money. The Veterans Administration (VA) offers several home loan opportunities, and this option is one of them. The VA cash out refinancing process is also fairly straightforward. Read on to learn more.

What is a VA Cash Out Refinance?

Not many people are familiar with cash out refinance loans, as home equity lines of credit or refinancing are more popular ways of making use of home value. However, for a cash out refinance, this is a process in which you replace your existing mortgage with a newer, larger loan and use the proceeds to pay off your existing mortgage. You receive the remaining amount as a lump sum payment and proceed to make monthly payments on the new loan. So, for example, if you are paying the mortgage on a $200,000 house and have $100,000 in equity built up, a cash-out loan for the value of the house, in this case $200K, would pay off the remaining $100K from the original mortgage and give you $100K in cash. Within the VA, there are many home-loan options that provide Servicemembers with VA-backed home loans, and a cash-out option is one such offering. A VA cash out refinance loan is only offered to Servicemembers who qualify for a VA-backed home loan. A VA home loan cash out refinance might be a good option for those who have a lot of equity built into their homes but don’t mind starting back from the beginning to repay a home mortgage.

Key Features of VA Cash Out Refinancing

Anyone looking to take advantage of a VA mortgage cash out refinance should be familiar with the various benefits and features of VA Cash Out Refinancing, such as competitive interest rates, no private mortgage insurance, and high loan-to-value ratios. The payment terms of a VA mortgage cash out refinance vary depending on the lender, the loan amount, and other factors. However, most have a maximum loan term of the original VA home loan plus 10 years, but not more than 30 years and 32 days. The closing costs are anywhere between 3–5%, depending on the lender. The funding fee is 2.15% for the first use and 3.3% for any subsequent use. There is no limit on the loan amount for a VA cash-out refinance if you have full entitlement. This means you can refinance your home for 100% of its value and take all your equity out as cash. The proceeds from a VA cash-out refinance are not taxable because they are considered a loan, not income. However, you may be able to deduct interest on your original loan balance.

Eligibility & How to Apply for a VA Cash Out Refinance

If you wish to apply for a VA home loan cash out refinance, you must meet the following eligibility requirements:

• Served on active duty for at least 24 continuous months, or mobilized for 90 days.
• Served in the Reserves or National Guard for at least 6 years, or 90 days under Title 10 or Title 32.
• Be the surviving spouse of a service member who died in the line of duty.
• Have a Certificate of Eligibility from the VA.
• Meet the lender’s credit score requirements for a VA home loan cash out refinance, usually over 600.
• Meet the lender’s debt-to-income ratio requirements.
• Demonstrate proof of income.
• Have made six consecutive on-time payments on your current VA loans.
• Use the home as your primary residence.

To apply for a VA cash out refinance, follow these steps:

1. Choose a lender: Compare lenders to get the best deal.
2. Get a Certificate of Eligibility (COE): This document verifies that you meet the service requirements for a VA loan. You can request this online, by mail, or through your lender.
3. Gather documents: You’ll need to provide your lender with:
   • Pay stubs
   • W-2s
   • Bank statements
   • Tax returns
4. Apply for the loan: Submit your application for the VA home loan cash out refinance along with any supporting documents to your lender.
5. Get an appraisal: A third-party appraiser will assess the value of your home.
6. Undergo underwriting: The lender will verify your financials.
7. Close the loan: Sign the final loan documents and pay closing costs.

VA Cash Out Refinance Rates: What to Expect

There are many factors that can influence the type of cash out refinance VA loan you qualify for. If your credit score is low, for example, lenders might consider your credit history too much of a risk and either deny you or give you a higher interest rate on your VA cash out refinancing application. Lenders also use your debt-to-income ratio to determine if you can afford monthly payments. This is calculated by what percentage of your monthly income already goes to paying off other debts. Your home’s appraisal value determines how much cash you can access. Other factors include your employment history, monthly income, market conditions, and whether you meet the lender’s loan-to-value requirements.

As to the types of rates you might expect based on these factors, of course this will vary based on the lender you choose, the loan type, what property you own and your monthly income. As of February 25, 2025, the interest rate for a 30-year VA cash-out refinance loan is 6.5%. This is based on a loan-to-value ratio that is less than 90%. VA cash-out refinance loans are government-backed loans, so rates are typically lower than conventional cash-out refinance loans. You’ll pay a VA funding fee between 2.15% and 3.3% of the loan amount. Some disabled Veterans and surviving spouses may be exempt from paying this funding fee. Most people roll this fee into their loan amount, so you won’t need to pay it upfront.

Finding VA Cash Out Refinance Lenders

As with any new financial venture, you want to make sure you pick the right lender to meet your financial needs when looking to take out a VA mortgage cash out refinance loan. VA cash out refinance lenders all have different requirements and rates, and some have better customer service than others. Be sure to investigate the various rates, customer service, and reviews of various lenders before choosing one. Consider looking into credit unions with strong VA loan programs, compare interest rates and fees from multiple lenders, and prioritize lenders with a good reputation for customer service and Veteran-focused expertise. Some traditional banks have Veteran-specific services as well, some of which include Veterans United, USAA, Navy Federal Credit Union, and Chase Bank. When selecting a lender, consider the following tips:

• Choose a lender that has experience with various types of VA loans, whose terms and eligibility factors you understand.
• Choose a lender with competitive rates and fees for a VA mortgage cash out refinance.
• Read reviews on your selected lender and choose one that has good customer service, online tools and transparency, and easy access to account monitoring.
• Be familiar with and make sure you meet any credit score requirements.
• Look for Veteran-focused lenders who specialize in VA loans, such as Veterans United Home Loans.

Frequently Asked Questions