VA Cash-Out Refinance Fees and Closing Costs
The funding fee on a VA cash-out refinance is 2.15% for first-time use and 3.3% for subsequent use, compared to 0.5% on an IRRRL. Lender origination fees add up to 1 percent on top of that, plus appraisal, title, and recording charges. Veterans with a VA’s exemption criteria (service-connected disability compensation, eligible DIC, qualifying pre-discharge ratings, or Purple Heart) are exempt from the funding fee, which changes the entire cost equation.
Next step:Check Your VA Loan Eligibility
Funding Fee Rates by Category
- First-use borrowers pay a 2.15% funding fee on the full loan amount when closing a VA cash-out refinance. [VA.gov]
- The fee jumps to 3.3% for subsequent use of the VA home loan benefit. “Subsequent use” is based on whether the borrower previously used a VA-backed or VA direct home loan, not simply on the number of cash-out transactions. VA recognizes a first-use exception for a prior VA loan used only to purchase a manufactured home. Have the lender verify benefit-use status. [VA.gov]
- Veterans rated at VA’s exemption criteria are fully exempt from the funding fee on every VA loan. [VA.gov]
Funding Fee by Usage Type
- First-time VA loan users pay a 2.15% funding fee on a cash-out refinance, calculated on the entire new loan balance. [VA.gov]
- Subsequent-use borrowers pay 3.3%, adding more than a full percentage point to the fee compared with first-time users. [VA.gov]
- An IRRRL charges only 0.5%, so borrowers should weigh whether the cash they pull justifies the higher cash-out cost. [VA.gov]
Exemptions and Cost Controls
- Veterans with a disability rating pending at closing should notify the lender, because the fee exemption takes effect once the VA confirms the rating. [VA.gov]
- The 1 percent cap on lender origination charges prevents inflated fees and applies to every VA cash-out refinance regardless of loan size. [38 CFR 36.4313] [38 CFR 36.4313]
- Third-party charges are restricted to specific categories including the appraisal, recording fees, credit report, title insurance, and hazard insurance, cutting out junk fees. [38 CFR 36.4313] [38 CFR 36.4313]
How Cash-Out Fees Add Up
- First-use borrowers pay a funding fee of 2.15% of the loan amount, typically the single largest line item at closing on a VA cash-out refinance. [VA.gov]
- Borrowers using their VA benefit again pay 3.3% instead of 2.15%, so confirming first-use or subsequent-use status with the lender matters before locking. [VA.gov]
- VA permits a lender flat charge of up to 1% of the loan amount in lieu of other lender origination-related costs not separately permitted by regulation. Reasonable, authorized itemized fees and bona fide discount points may be assessed separately under applicable rules. Review the full Loan Estimate rather than assuming every line above 1% violates VA policy. [38 CFR 36.4313] [38 CFR 36.4313]
Top questions before you dig in
What is the VA funding fee for a cash-out refinance?
The VA funding fee on a cash-out refinance is 2.15% of the loan amount for first-time use and 3.3% for subsequent use. Veterans with a VA’s exemption criteria (service-connected disability compensation, eligible DIC, qualifying pre-discharge ratings, or Purple Heart) are exempt from paying the fee entirely.
Is a VA cash-out refinance a good idea?
A VA cash-out refinance works when the equity you access solves a problem worth more than the costs. The funding fee runs 2.15% on first use or 3.3% on subsequent use, and lender origination plus third-party charges add to the total.
What is the current VA cash-out refinance rate?
The VA does not set cash-out refinance rates, so your rate depends on credit score, loan amount, and each lender’s pricing adjustments. Cash-out rates price higher than IRRRL rates because the lender underwrites the full file with a new appraisal, adding risk that gets built into the rate.
The Bottom Line Up Front
VA cash-out refinance fees are the highest of any VA refinance option. The funding fee alone is 2.15% on first use and 3.3% on subsequent use, and that is before lender origination, title, appraisal, and recording charges reach the settlement statement. Every borrower pulling cash out needs to measure total closing costs against the equity they are accessing.
Compare the cash-out funding fee to the IRRRL funding fee of 0.5%, and the gap is immediate. On top of the funding fee, lenders can charge an origination fee up to 1 percent of the loan amount. Third-party costs add VA appraiser charges, recording fees, credit report fees, title insurance, hazard insurance, and survey or flood zone determinations. Veterans with a VA’s exemption criteria (service-connected disability compensation, eligible DIC, qualifying pre-discharge ratings, or Purple Heart) are exempt from the funding fee entirely, which drops the total cost substantially. That exemption is the single largest fee reduction available on this loan type.
- The cash-out funding fee is 2.15% on first use and jumps to 3.3% on subsequent use.
- VA’s flat lender charge of up to 1% replaces origination costs not otherwise separately allowable. Other permitted fees and discount points are assessed separately.
- Veterans with a VA’s exemption criteria (service-connected disability compensation, eligible DIC, qualifying pre-discharge ratings, or Purple Heart) are exempt from the funding fee entirely.
- The IRRRL funding fee is only 0.5%, which makes the cash-out fee increase hard to overlook.
- Third-party costs include the VA appraisal, title insurance, recording fees, and hazard insurance premiums.
What Does a VA Cash-Out Refinance Cost?
The biggest line item is the funding fee: 2.15% for first-use borrowers, 3.3% on subsequent use. Beyond that, VA permits a flat lender origination charge of up to 1% of the loan amount. You may also pay for a VA appraisal, title insurance, recording fees, a credit report, and hazard insurance. Those third-party charges vary by county and property, but the funding fee drives the bulk of your upfront cost.
| Fee Category | What You Pay | Notes |
|---|---|---|
| VA Funding Fee, first use | 2.15% of loan amount | Exempt for qualifying Veterans |
| VA Funding Fee, subsequent use | 3.3% of loan amount | Exempt for qualifying Veterans |
| Lender Origination Fee | Up to 1 percent of loan amount | VA caps this across all loan types |
| VA Appraisal | Set by VA fee schedule | Required for cash-out, waived on IRRRL |
| Title and Recording | Varies by county | Listed on the loan estimate |
| Credit Report | Third-party charge | VA allowable fee |
| Hazard Insurance | Required at closing | Premium set by coverage and property |
| Survey or Flood Zone | If applicable | Required when property is in a flood area |
Compare that to an IRRRL, where the funding fee is just 0.5% and the VA waives the appraisal. That spread matters. The higher cost on a cash-out reflects the added risk to the VA guarantee, since equity is leaving the property rather than staying as a cushion against loss. Consolidating high-interest debt or funding a major home repair can justify the expense. Rolling the funding fee into the loan balance is possible, but that increases both the amount financed and your monthly payment going forward.
The VA Funding Fee on Cash-Out Refinances
The cost borrowers underestimate is not the fee rate itself but how that rate gets applied. The funding fee is calculated on the total new loan amount, including the existing payoff balance and not just the cash-out portion. Borrowers who expect the fee to cover only the equity they are accessing end up paying significantly more.
When the funding fee rolls into the new loan balance, the borrower pays interest on the fee for the remaining term. On a longer-term refinance, the true cost of the fee exceeds its face value by the interest it generates. A borrower comparing this refinance against other ways to access equity needs both numbers, the fee itself and the interest that fee will accrue.
Borrowers with a qualifying service-connected disability avoid this cost entirely, which eliminates the single largest line item on a cash-out closing. Non-exempt borrowers face steeper math. On a subsequent-use refinance, the higher rate applies to the full loan amount, which increases the total interest cost. A loan officer should present the total cost as two figures: the fee and the accumulated interest it will generate over the life of the loan. VA’s net tangible benefit framework for cash-out refinancing considers qualifying features that may include removal of mortgage insurance, a shorter term, lower rate or principal-and-interest payment, increased residual income, or an ARM-to-fixed conversion. A subjective fee-versus-cash comparison alone does not determine VA NTB compliance.
Lender Origination and Processing Fees
The VA caps the lender origination fee at 1 percent of the loan amount. That cap covers origination, processing, and underwriting as one combined charge. Beyond the origination line, borrowers pay a defined set of third-party costs the VA has specifically authorized. Any fee outside these categories is worth questioning.
| Allowable Fee | What It Covers | Note |
|---|---|---|
| Lender origination | Origination, processing, underwriting | VA flat charge up to 1%; separately permitted fees may also apply |
| VA appraisal | Property valuation ordered through the VA portal | Required on every cash-out refinance |
| Credit report | Tri-merge credit pull | Ordered during underwriting |
| Title fees | Title search and lender’s title insurance | Varies by county and title company |
| Recording fees | County recording of the new deed of trust | Set by the county |
| Hazard insurance | Homeowners insurance premium or escrow setup | Required before closing |
| Survey | Property boundary survey | Required by some lenders or jurisdictions |
| Flood zone determination | FEMA flood zone certification | Required if the property is in or near a flood zone |
Watch for lenders who split origination into separate line items for processing and underwriting. If those charges exceed 1 percent combined, the lender has gone past the VA cap and the borrower has grounds to push back. The loan estimate should show one combined origination charge at or below that ceiling, and every other fee on the closing disclosure should trace to the allowable categories above. Charges labeled as administrative fees or document preparation that fall outside this list are not VA-allowable and should be challenged before signing.
Appraisal, Title, and Third-Party Costs
Every cash-out file requires a full VA appraisal, title work, and third-party charges that an IRRRL does not carry. The VA sets appraisal fees by geographic zone and property type, so that cost is locked before the borrower picks a lender. Title, recording, and credit report fees are shoppable, and comparing providers cuts the closing total.
- VA appraisal: Required on every cash-out refinance because the VA needs a current property valuation to confirm the equity position supports the new loan balance. The appraisal cannot be waived. The fee is assigned by the VA based on geographic zone and property type, and the borrower has no ability to negotiate the amount or select the appraiser.
- Title insurance and search: Protects the lender against ownership disputes, undisclosed liens, and recording errors. The VA does not regulate this fee, which means the borrower can shop for a title provider. Title charges vary by state and county, and getting quotes from two or three companies before closing can reduce this line item by a meaningful amount.
- Recording fees and credit report: Set by the county recorder and credit bureaus, not the lender. Neither charge is negotiable. A credit report pull covers all three bureaus at a set amount, and recording fees depend on the county where the property is located. Both show up on the settlement statement as smaller, predictable line items with no lender variance.
- Hazard insurance, survey, and flood zone determination: Conditional items that appear when the property’s location or risk profile triggers a lender or VA requirement. Flood zone certification is required if the property sits within or near a designated flood area, hazard insurance must be bound before closing, and survey requirements depend on state law and title company policy.
Cash-Out Refinance Costs vs IRRRL Costs
The cost gap between a cash-out refinance and an IRRRL is not close. Cash-out files require a full VA appraisal, title insurance, recording charges, and a funding fee that runs several times higher than the streamline rate. VA does not generally require a new appraisal or routine full credit-underwriting package for an IRRRL. Title, insurance, recording and lender-imposed costs may still apply, so compare actual Loan Estimates for your transaction. Borrowers who only need a rate reduction or term change should exhaust the streamline path first. The funding fee alone drives the separation: the cash-out first-use rate is more than four times the IRRRL rate, and subsequent use pushes it even wider.
| Cost Category | Cash-Out Refinance | IRRRL |
|---|---|---|
| Funding Fee, First Use | 2.15% of loan amount | 0.5% of loan amount |
| Funding Fee, Subsequent Use | 3.3% of loan amount | 0.5% of loan amount |
| VA Appraisal | Required | Not required |
| Title Search and Insurance | Required | Not required by VA |
| Lender Origination | Up to 1 percent | Up to 1 percent |
| Credit Report | Required | Required |
| Recording Fees | Required | Required |
The gap is structural. The VA classifies cash-out transactions at purchase-level risk, which triggers the full property valuation, fresh title work, and the higher funding fee tier. Borrowers pulling equity should measure total closing costs against the amount accessed. When the draw is small relative to fees, the breakeven period stretches and the refinance stops making financial sense. Lenders who specialize in VA files can calculate the exact crossover point where closing costs are recovered through savings, based on the loan amount, the equity position, and whether the borrower qualifies for a funding fee exemption.
Rolling Fees Into Your Loan: Pros and Risks
Rolling the funding fee and closing costs into the new loan balance eliminates the upfront cash outlay, but it raises the total amount financed and interest owed over the repayment period. For a VA cash-out refinance, VA’s 100% ceiling includes the financed funding fee. If the new total loan balance would exceed the appraised reasonable value, a borrower must reduce the balance, pay the fee or costs from other funds, or otherwise restructure the loan. A lender may set a lower LTV cap.
- Funding fee financing: That keeps cash in pocket at closing. But financing the fee increases the principal balance and the interest paid over the repayment period. The interest on the financed fee alone can add a meaningful amount to total repayment.
- Third-party cost absorption: Each added line item shrinks the net equity left after closing and pushes the loan-to-value ratio closer to the ceiling.
- Recoupment: The VA 36-month fee recoupment requirement applies to Type I VA-to-VA cash-out transactions (where the new loan does not exceed the payoff). It is not identically applied to all Type II cash-outs or conventional-to-VA refinances. Distinguish the statutory fee recoupment test from a separate consumer financial break-even analysis that borrowers can perform for any refinance. A borrower who breaks even slowly may end up paying more in accumulated interest on the rolled-in fees than those fees would have cost out of pocket, which makes the cash-out benefit less valuable than it appeared on paper.
- Equity trade-off: Financing every available closing cost raises the loan-to-value ratio, which can narrow future refinance options and reduce the net cash available on a later transaction. If property values flatten or dip, a borrower who rolled in every fee has less room to access equity or switch loan programs without bringing cash to the table.
Is the Cost Worth the Equity You Access?
What the cash does after closing determines whether the fees make financial sense. Purpose matters. Every charge covered in this article stacks onto the new loan balance, raising the amount financed and the monthly payment. The trade works when the cash-out creates a return that exceeds the combined cost of the funding fee, third-party charges, and the interest paid on those amounts over the remaining loan term.
| Cash-Out Purpose | Financial Effect | Worth the Fees? |
|---|---|---|
| Eliminating higher-rate debt | Replaces credit cards or personal loans with a single mortgage payment at a lower rate | May make sense when the rate spread creates monthly savings that recover fees before you sell or refinance again. Main risk: extending repayment shifts unsecured debt onto the home. |
| Home improvements that raise property value | Converts equity into upgrades that increase the appraised value | May make sense when the improvement has a documented value impact. Main risk: renovation cost and appraisal value are not the same; overruns reduce net equity. |
| Consolidating a non-VA loan into VA terms | Replaces conventional or FHA financing and may remove mortgage insurance | May make sense when eliminating PMI and improving terms outweighs the funding fee over your planned hold period. |
| Building emergency reserves | Provides liquid cash but converts equity into interest-bearing debt | Rarely advantageous. The borrower pays mortgage-rate interest on liquid funds that may earn far less. Main risk: converting home equity to cash reduces the home’s protection against future value declines. |
| Discretionary spending | Increases the balance and payment with no offsetting financial benefit | No |
Borrowers who consolidate higher-rate credit card or personal loan debt into a single VA mortgage payment put the math in their favor when the rate spread is wide enough for monthly savings to recover the refinance costs. The same logic applies to home improvements that raise the appraised value above the added balance. Pulling equity for spending that generates no financial return flips the equation, because the borrower pays mortgage-rate interest on closing costs for the life of the loan. Run the recoupment math before moving forward.
How to Reduce Your Cash-Out Refinance Costs
The funding fee is the largest single charge on a cash-out file, but it is not a fixed number for every borrower. Disability exemptions eliminate it entirely, and the remaining charges have room for negotiation or offset. Lender credits, third-party shopping, and direct origination negotiation can each cut the final closing bill. Set this strategy before the application, because these levers disappear once the file hits underwriting.
- Disability exemption: Veterans who meet the service-connected disability threshold covered earlier owe no funding fee, which wipes out the single largest line item on the closing disclosure. Surviving spouses of Veterans who died in service or from a service-connected condition qualify for the same full exemption. Check the Certificate of Eligibility to confirm status before applying.
- Lender credits: Accepting a rate above par lets the lender generate a credit applied against closing charges at settlement. This can reduce or eliminate what the borrower pays out of pocket, but it raises the monthly payment for the life of the loan. Run the breakeven math before deciding whether the credit saves more than the higher rate adds over time.
- Third-party fee shopping: Title insurance, survey charges, and recording fees are not set by the VA or the lender. They vary by provider. Requesting quotes from two or three title companies before closing can cut hundreds from the bill, and federal rules give borrowers the right to select their own title and settlement service providers.
- Origination negotiation: The VA caps what a lender can charge for origination, but that cap is a ceiling, not a floor. A lender competing for the refinance business may reduce or waive part of the origination charge when asked. Borrowers with clean credit profiles and solid payment histories are in a better position to negotiate that charge down.
The Bottom Line
A VA cash-out refinance carries real costs. The funding fee alone runs 2.15% on first use and 3.3% on subsequent use, applied to the entire new loan amount. VA permits a flat lender origination charge of up to 1%, while appraisal, title, and recording charges are separately assessed. Those charges add up to several times what an IRRRL costs at its 0.5% funding fee.
Rolling those fees into the loan eliminates upfront cash but increases the total amount financed and the interest paid over the full term. Veterans who meet VA’s exemption criteria are exempt from the funding fee, which changes the math significantly. Exempt categories include Veterans receiving service-connected disability compensation, eligible DIC surviving spouses, qualifying pre-discharge ratings, and active-duty Purple Heart recipients. For everyone else, what the cash does after closing determines whether the cost was worth it. Purpose drives the answer.
Frequently Asked Questions
What can a lender charge for originating a VA cash-out refinance?
The VA caps lender origination fees at 1 percent of the loan amount. That cap covers processing, underwriting, and document preparation. Discount points are separate. A lender can charge points to buy down the rate, and those do not count toward the 1 percent limit. Borrowers should review the loan estimate line by line. The origination charge and discount points appear as separate items. If the origination fee exceeds 1 percent before points, that is a VA fee rule violation and should be challenged before closing.
What third-party fees are allowed on a VA cash-out refinance?
The VA permits a defined list of third-party charges: VA appraiser, recording fees, credit report, title insurance, hazard insurance, survey, and flood zone determination. These are separate from the lender’s origination fee and the funding fee. Charges outside this list are non-allowable, meaning the lender cannot pass them to the borrower. If a line item on the loan estimate does not fall into one of those categories, ask the lender to justify it. Non-allowable charges on a VA closing disclosure are a compliance problem and should be disputed before closing.
How do I calculate total costs on a VA cash-out refinance?
Start with the funding fee: 2.15% for first use, 3.3% for subsequent use. Add the lender origination charge (up to 1% flat charge under VA rules; separately permitted fees may also apply). Then add third-party charges: VA appraiser, title insurance, recording fees, credit report, hazard insurance, and survey or flood zone determination if required. A lender’s loan estimate breaks each charge out by line item. The total depends on the loan amount, the property’s location, and whether the borrower has used a VA loan before. Requesting loan estimates from multiple lenders is the clearest way to compare.
Can VA cash-out refinance closing costs be financed into the loan?
Yes. The funding fee and other closing costs can be rolled into the new loan balance, reducing cash needed at closing but increasing the total amount financed. That means a higher monthly payment and less net equity received. On a cash-out refinance where the goal is accessing equity, financing costs reduces the cash in hand at closing. Borrowers should compare what they net after rolling in fees versus paying out of pocket. A loan estimate from the lender shows both scenarios so the tradeoff is clear before committing.
Does every lender charge the same closing costs on a VA cash-out refinance?
No. The VA caps the origination fee at 1 percent, but everything else varies. Discount points, title insurance, appraisal fees, and third-party charges differ by lender and by location. Some lenders offer credits to offset costs in exchange for a higher rate. Others keep origination fees low but add charges under different line items. The only way to compare is to request a loan estimate from each lender. Focus on total cost, not any single line item. A lower rate paired with higher fees can cost more over the life of the loan.
What costs catch borrowers off guard on a VA cash-out refinance?
The funding fee is the biggest surprise. At 2.15% for first use and 3.3% for subsequent use, it adds thousands to the loan balance. Borrowers coming from an IRRRL, where the fee is 0.5%, feel that jump hardest. Beyond the funding fee, title insurance and recording fees vary by state, and prepaid items like property taxes and homeowners insurance collected at closing add to the total. Reviewing every line on the loan estimate before committing is the best way to avoid sticker shock at the closing table.
Are any VA cash-out refinance costs waived for disabled Veterans?
Veterans who meet VA’s exemption criteria are exempt from the funding fee on all VA loans, including cash-out refinances. Qualifying categories include receiving service-connected disability compensation, eligible DIC, qualifying pre-discharge ratings, and active-duty Purple Heart. On a larger loan balance, the funding fee alone runs thousands of dollars, making this exemption significant. It applies automatically when the VA’s system confirms the disability rating through the Certificate of Eligibility. No separate application is needed. Other closing costs, including the appraisal, title insurance, and recording fees, still apply regardless of disability status. The funding fee is the only charge waived based on service-connected disability.
How do VA cash-out refinance costs compare to a conventional cash-out refinance?
The funding fee is the biggest cost difference. VA cash-out carries a 2.15% fee on first use and 3.3% on subsequent use, while conventional cash-out refinances have no VA funding fee. PMI, if applicable, depends on the conventional loan’s LTV and lender or product requirements, and Veterans with a VA’s exemption criteria (service-connected disability compensation, eligible DIC, qualifying pre-discharge ratings, or Purple Heart) are exempt.