Rates, Requirements, LTV, and Net Cash
2026 VA Cash-Out Refinance Rates, Requirements, and Calculator
Under 38 CFR 36.4312, VA loans may bear an interest rate agreed upon by the Veteran and the lender. What the VA does set: the 100% maximum loan-to-value, the funding fee (2.15% first use, 3.30% subsequent), the 36-month recoupment window on Type I loans, and the net tangible benefit requirement on every cash-out.
Next step:
Get a Cash-Out Rate Quote
How Much Cash
- Max LTV: Up to 100% of the VA-determined reasonable value. The funding fee may be included but must not cause the loan to exceed 100% of reasonable value; any excess is paid in cash at closing. 38 CFR 36.4306(a); Ch. 6 sec. g
- Net cash: New loan amount minus current payoff, funding fee, and closing costs equals the cash the borrower receives at closing. Definitional
- Texas limit: 80% of fair market value on homestead property under Article XVI Section 50(a)(6)(B) of the Texas Constitution. TX Const. Art. XVI Sec. 50(a)(6)(B)
- Type II only: The borrower removes equity only in a Type II cash-out, where the new loan exceeds the payoff amount. Ch. 6 sec. c
What Sets the Rate
- Rate: Under 38 CFR 36.4312, VA loans may bear an interest rate agreed upon by the Veteran and the lender. 38 USC 3703(c)(4); 38 CFR 36.4312
- Rate vs APR: The interest rate excludes fees; the APR includes points, broker fees, and other charges paid to get the loan. CFPB
- Discount points: One point equals 1% of the loan amount and buys down the rate. The tradeoff favors borrowers who hold the loan long term. CFPB
- Type I rate test: A Type I VA-to-VA cash-out must reduce the fixed rate by at least 50 basis points (fixed-to-fixed) or 200 basis points (fixed-to-ARM). 38 USC 3709(b); Ch. 6 sec. n
Costs and Fees
- Funding fee, first use: 2.15% of the loan amount. Subsequent use: 3.30%. Does not change with down payment. VA.gov; 38 USC 3729(b)(2)
- Fee financing: The funding fee may be included in the loan amount, but the total must not cause the loan to exceed 100% of the reasonable value. 38 CFR 36.4306(a)
- Exemptions: Veterans with VA disability compensation, surviving spouses receiving DIC, and active-duty Purple Heart recipients pay no funding fee. 38 USC 3729(c)
- Type I cost limit: If a Type I cash-out increases the P&I payment, the lender may not charge the Veteran loan fees or closing costs beyond taxes, escrow, and the VA funding fee. Ch. 6 sec. l
Requirements
- Seasoning (VA-to-VA): Type I requires 210 days from first payment due date plus 6 consecutive payments. Type II requires 210 days from first payment made plus 6 payments (not necessarily consecutive). Ch. 6 sec. p; 38 USC 3709(c)
- Net tangible benefit: Every cash-out must provide at least one NTB: lower rate, lower payment, shorter term, eliminated MI, higher residual income, LTV at or below 90%, or ARM-to-fixed conversion. Ch. 6 sec. o; 38 CFR 36.4306(b)
- Recoupment (Type I only): Fees and costs must be recouped within 36 months through lower monthly payments. Does not apply to Type II. 38 USC 3709(a); Ch. 6 sec. m
- Loan comparison disclosure: Lender must provide an initial disclosure within 3 business days of application and a final at closing, comparing payoff, rate, term, total payments, and LTV. Ch. 6 sec. q; 38 CFR 36.4306(e)
Top questions before you dig in
Can a Veteran borrow up to 100% of the home's value on a VA cash-out?
Does the VA set the interest rate on a cash-out refinance?
What is the difference between a Type I and Type II VA cash-out?
The Bottom Line Up Front
A VA cash-out refinance lets an eligible Veteran borrow up to 100% of the home’s reasonable value to pay off the existing mortgage, other liens, and receive cash at closing.
Under 38 CFR 36.4312, the interest rate may be agreed upon by the Veteran and the lender. The funding fee is 2.15% on first use and 3.30% on subsequent use (VA.gov). A Type I cash-out, where the new loan does not exceed the payoff, carries a 36-month recoupment requirement and a rate reduction test. A Type II cash-out, where the borrower pulls equity, does not require recoupment but must still demonstrate a net tangible benefit. The lender must provide a loan comparison disclosure within 3 business days of application and again at closing (VA Lenders Handbook Ch. 6, sec. q).
How Much Cash Can a Veteran Get From a VA Cash-Out Refinance
The net cash a Veteran receives at closing equals the new loan amount minus the current payoff, any other liens being paid off, the funding fee, and closing costs. The maximum loan amount is 100% of the VA-determined reasonable value of the property (38 CFR 36.4306(a)).
Factors that determine net cash:
- Reasonable value (NOV): The VA appraisal sets this figure. It is the ceiling for the new loan amount.
- Current payoff: The amount needed to satisfy the existing mortgage as of the closing date, including any accrued interest.
- Funding fee: 2.15% first use, 3.30% subsequent use (VA.gov). May be financed into the loan, but the funding fee must not cause the loan to exceed 100% of the reasonable value. Any excess is paid in cash at closing (38 CFR 36.4306(a); Ch. 6 sec. g).
- Closing costs: May be paid from loan proceeds, but the loan amount must not exceed the maximum (VA Lenders Handbook Ch. 6, sec. l).
- LTV scenarios: At 100% LTV the Veteran keeps maximum cash but has no remaining equity. At lower LTVs the net cash decreases but equity is preserved.
What Determines a VA Cash-Out Refinance Rate
Under 38 USC 3703(c)(4) and 38 CFR 36.4312, VA loans may bear an interest rate agreed upon by the Veteran and the lender. For Type I VA-to-VA cash-out refinances, the new rate must meet the reduction thresholds in 38 USC 3709(b).
- Rate agreement: For loans bearing an interest rate agreed upon by the Veteran and the lender, the Veteran may pay reasonable discount points (38 CFR 36.4312(b)). The rate reflects the borrower’s credit profile and the current market.
- Type I rate test (VA-to-VA): Fixed-to-fixed must reduce by at least 50 basis points. Fixed-to-ARM must reduce by at least 200 basis points. ARM-to-fixed has no reduction requirement; the rate may increase (Ch. 6 sec. n; 38 USC 3709(b)).
- Discount points and the rate: One discount point equals 1% of the loan amount and reduces the rate. The rate reduction cannot come solely from discount points on a Type I cash-out. If more than one point is included in the loan amount on a Type I fixed-to-ARM, the LTV is limited to 90% (Ch. 6 sec. n).
Rate vs APR vs Discount Points
The interest rate is the annual cost of borrowing, expressed as a percentage. It does not include fees. The APR is a broader measure that includes the interest rate plus points, broker fees, and other charges paid to get the loan (CFPB). A lower rate does not always mean a lower cost if the borrower paid significant points to get it.
- Interest rate: The cost paid each year to borrow the money, expressed as a percentage. It does not reflect fees or any other charges (CFPB).
- APR: Reflects the interest rate, any points, mortgage broker fees, and other charges. The APR is typically higher than the interest rate (CFPB).
- Discount points: One point equals 1% of the loan amount. Paying points lowers the rate. The tradeoff favors borrowers who hold the loan long enough to recoup the upfront cost through lower payments (CFPB).
- Comparing offers: Use the Loan Estimate to compare total costs, not the rate alone. Two lenders offering the same rate may charge different points and fees, producing different APRs and total costs.
Comparing Loan Estimates
The Loan Estimate is a standardized form that every lender must provide within 3 business days of receiving a loan application. It shows the estimated interest rate, monthly payment, total closing costs, and how much cash the borrower will need at closing. Comparing Loan Estimates from multiple lenders side by side shows how offers differ on rate, fees, and total cost.
The VA adds its own comparison requirement: the lender must provide an initial loan comparison disclosure within 3 business days of the application and a final disclosure at closing. This VA-specific comparison must include the payoff amount vs the new loan, current rate vs new rate, loan types, remaining term vs new term, total payments over the life of each loan, and the present combined LTV vs the new LTV (VA Lenders Handbook Ch. 6, sec. q).
Rate Locks
A rate lock is an agreement between the borrower and the lender that fixes the interest rate for a specified period. If the loan closes within that window, the borrower gets the locked rate regardless of market movement. If it does not close in time, the lock may expire and the rate could change. Rate lock terms, extension fees, and float-down options vary by lender.
Paying Points and the Recoupment Math
Discount points reduce the rate, but the upfront cost must be recovered through lower payments over time. For Type I VA-to-VA cash-out refinances, the VA requires all fees and costs (excluding taxes, escrow, and the VA funding fee) to be recouped within 36 months through lower monthly payments (38 USC 3709(a); VA Lenders Handbook Ch. 6, sec. m). This requirement does not apply to Type II cash-out refinances.
- 36-month cap (Type I only): If the recoupment period exceeds 36 months, the loan cannot be guaranteed. The recoupment calculation compares the old P&I to the new P&I and divides the allowable costs by the monthly payment reduction.
- Excluded costs: The VA funding fee, escrow, and prepaid expenses (insurance, taxes, Mello-Roos, HOA fees) are excluded from the recoupment calculation (Ch. 6 sec. m).
- Type I cost restriction: If a Type I cash-out increases the P&I payment, the lender may not charge the Veteran loan fees, closing costs, or expenses other than taxes, escrow, and the VA funding fee (Ch. 6 sec. l).
Type I vs Type II VA Cash-Out Refinance
A Type I cash-out refinance is one where the new loan amount, including the VA funding fee, does not exceed the payoff amount of the existing loan. A Type II cash-out is where the new loan exceeds the payoff, allowing the Veteran to receive cash from equity (VA Lenders Handbook Ch. 6, sec. b-c).
| Feature | Type I | Type II |
|---|---|---|
| New loan vs payoff | New loan (incl. funding fee) does not exceed payoff | New loan exceeds payoff; borrower receives cash from equity |
| Rate reduction test (VA-to-VA) | Required: 50 bps fixed-to-fixed, 200 bps fixed-to-ARM | Not required |
| 36-month recoupment | Required (fees and costs must be recouped within 36 months) | Not required |
| Seasoning (VA-to-VA) | 210 days from first payment due date + 6 consecutive payments | 210 days from first payment made date + 6 payments (not necessarily consecutive) |
| Net tangible benefit | Required (at least one NTB) | Required (at least one NTB) |
| Cost restriction on payment increase | If P&I increases, lender may not charge fees/costs beyond taxes, escrow, and funding fee | No additional cost restriction |
| Maximum LTV | 100% of reasonable value (90% if fixed-to-ARM with >1 discount point) | 100% of reasonable value |
Sources: VA Lenders Handbook Ch. 6; 38 USC 3709; 38 CFR 36.4306
VA Cash-Out Refinance Requirements
The borrower must have an eligible Certificate of Eligibility and meet the occupancy requirement (VA Lenders Handbook Ch. 6, sec. k; Ch. 3). The property must meet VA minimum property requirements. Full credit underwriting is required for all cash-out refinancing loan types (Ch. 6, sec. j).
- Occupancy: The Veteran must meet the occupancy requirement outlined in VA Lenders Handbook Chapter 3 (Ch. 6, sec. k).
- Appraisal: A VA appraisal establishing the reasonable value is required on every cash-out refinance.
- Credit and income: Full credit underwriting is required (Ch. 6, sec. j). The VA does not have a minimum credit score requirement (VA Lenders Handbook Ch. 4). The underwriter must follow VA credit underwriting guidelines in Chapter 4.
- Maximum term: The lesser of the original term plus 10 years or 30 years and 32 days (Ch. 6 sec. f).
VA Cash-Out Funding Fee
The VA funding fee on a cash-out refinance is 2.15% of the loan amount on first use and 3.30% on subsequent use (VA.gov). Unlike purchase loans, the cash-out fee does not change based on down payment. The fee may be financed into the loan, but the inclusion of the funding fee must not cause the loan to exceed 100% of the reasonable value (38 CFR 36.4306(a); VA Lenders Handbook Ch. 6, sec. g).
| Usage | Rate | On a Hypothetical $300,000 Loan |
|---|---|---|
| First use | 2.15% | $6,450 |
| Subsequent use | 3.30% | $9,900 |
| Exempt (disability, DIC, Purple Heart) | 0% | $0 |
Source: VA.gov Funding Fee and Closing Costs. Hypothetical example; not a rate quote.
Net Tangible Benefit and Loan Comparison Disclosure
Every VA cash-out refinance, both Type I and Type II, must provide at least one net tangible benefit to the Veteran (VA Lenders Handbook Ch. 6, sec. o; 38 CFR 36.4306(b)). The lender must also provide a loan comparison disclosure within 3 business days of the application and again at closing.
The NTB requirement is met if at least one of the following applies:
- The refinance eliminates monthly mortgage insurance (including USDA annual fee)
- The loan term is shorter than the existing loan
- The interest rate is lower than the existing rate
- The new LTV is at or below 90% of the reasonable value
- The monthly P&I payment is lower
- The Veteran’s monthly residual income is higher
- The refinance pays off an interim construction loan
- An ARM is converted to a fixed-rate mortgage
The loan comparison disclosure must compare: payoff amount vs new loan, current rate vs new rate, current loan type vs new, remaining term vs new term, total payments over the life of each loan, and the present combined LTV vs the new LTV. A separate home equity disclosure must state the dollar amount of equity being removed and explain how it may affect future sale or refinance (Ch. 6 sec. r).
VA Cash-Out vs IRRRL
The VA IRRRL (Interest Rate Reduction Refinancing Loan) is a streamline refinance with no appraisal, no income verification, and a 0.50% funding fee. It cannot produce cash to the borrower beyond minor reimbursements. A VA cash-out refinance requires a full appraisal, income and credit underwriting, and a higher funding fee, but allows the borrower to pull equity, pay off non-VA liens, and consolidate debt.
| Feature | VA Cash-Out | IRRRL |
|---|---|---|
| Cash to borrower | Yes (Type II) | No |
| Appraisal | Required | Not required |
| Income/credit underwriting | Full underwriting | Streamlined |
| Funding fee | 2.15% first / 3.30% subsequent | 0.50% |
| Can refinance non-VA loan | Yes | No (VA-to-VA only) |
| Net tangible benefit | Required | Required |
VA Cash-Out vs HELOC
A VA cash-out refinance replaces the existing mortgage with a new first lien. A home equity line of credit (HELOC) adds a second lien behind the first mortgage. A HELOC usually has a variable interest rate (CFPB). A VA cash-out refinance may carry a fixed or adjustable rate depending on the loan terms. Specific rates depend on the lender, borrower profile, and current market conditions at the time of application.
Texas Cash-Out Restrictions
Texas state law imposes additional restrictions on cash-out refinances of homestead property. Under Article XVI, Section 50(a)(6) of the Texas Constitution, these rules apply regardless of whether the loan is VA-guaranteed, conventional, or FHA.
| Rule | Requirement | Subsection |
|---|---|---|
| Maximum LTV | 80% of fair market value (all liens combined) | (B) |
| Fee cap | 2% of the original principal (excludes appraisal, survey, title insurance, title exam) | (E) |
| Cooling-off period | Cannot close before the 12th day after application or required notice | (M)(i) |
| One per year | Cannot close before the first anniversary of any prior Section 50(a)(6) extension on the same homestead | (M)(iii) |
| Closing location | Must close at the office of the lender, an attorney at law, or a title company | (N) |
| No recourse | Without recourse for personal liability unless obtained by fraud | (C) |
| Judicial foreclosure | May be foreclosed only by court order | (D) |
| No prepayment penalty | Payable in advance without penalty or charge | (G) |
Source: Texas Constitution, Article XVI, Section 50(a)(6). Published by the Texas Legislative Council (through November 4, 2025 amendments).
The Texas 80% LTV cap overrides the VA’s 100% LTV allowance for homestead property in Texas. A Texas Veteran using a VA cash-out will need at least 20% equity in the home.
The Bottom Line
A VA cash-out refinance gives eligible Veterans access to up to 100% of their home’s reasonable value. Under 38 CFR 36.4312, the interest rate may be agreed upon by the Veteran and the lender. Type I and Type II carry different requirements for rate reduction, recoupment, and seasoning.
Every cash-out must demonstrate a net tangible benefit. Texas homestead property is capped at 80% LTV. The lender must provide a loan comparison disclosure within 3 business days of application and again at closing, comparing the existing loan terms to the proposed refinance terms.
Frequently Asked Questions
What is the maximum LTV on a VA cash-out refinance?
100% of the reasonable value as determined by the VA (38 CFR 36.4306(a)). The funding fee may be included, but it must not cause the loan to exceed 100% of the reasonable value. Any portion that would exceed 100% is paid in cash at closing. Texas homestead property is capped at 80% under state constitutional law.
Does the 36-month recoupment apply to Type II cash-out refinances?
No. The 36-month fee recoupment requirement applies only to Type I cash-out refinancing loans, where the new loan amount does not exceed the payoff (38 USC 3709(a); VA Lenders Handbook Ch. 6, sec. m). Type II cash-out refinances do not have a recoupment requirement.
Can a Veteran use a VA cash-out to pay off a non-VA mortgage?
Yes. A VA cash-out refinance can be used to refinance any existing mortgage, whether VA, FHA, USDA, or conventional. The seasoning requirements (210 days and 6 payments) apply only to VA-to-VA refinances. For non-VA-to-VA cash-out refinances, the seasoning requirement does not apply (VA Lenders Handbook Ch. 6, sec. p).
What is the funding fee on a VA cash-out refinance?
2.15% of the loan amount on first use and 3.30% on subsequent use (VA.gov). Unlike purchase loans, the cash-out fee does not change based on down payment. Veterans with VA disability compensation, surviving spouses receiving DIC, and active-duty Purple Heart recipients are exempt (38 USC 3729(c)).
What is the difference between a Type I and Type II seasoning requirement?
Type I (VA-to-VA): 210 days from the first payment DUE date plus 6 CONSECUTIVE monthly payments. Type II (VA-to-VA): 210 days from the first payment MADE date plus 6 monthly payments that need NOT be consecutive. Seasoning does not apply to non-VA-to-VA cash-out refinances (VA Lenders Handbook Ch. 6, sec. p).
What does net tangible benefit mean on a VA cash-out?
The refinance must be in the financial interest of the Veteran. The NTB requirement is met if at least one of eight criteria is satisfied: eliminating mortgage insurance, shorter term, lower rate, LTV at or below 90%, lower P&I, higher residual income, interim construction payoff, or ARM-to-fixed conversion (VA Lenders Handbook Ch. 6, sec. o; 38 CFR 36.4306(b)).
Is a VA appraisal required on a cash-out refinance?
Yes. A VA appraisal establishing the reasonable value (Notice of Value) is required on every VA cash-out refinance to determine the maximum loan amount. This is different from an IRRRL, which does not require an appraisal.
Can a Veteran do a VA cash-out refinance on a homestead in Texas?
Yes, but Texas imposes additional restrictions under Article XVI, Section 50(a)(6) of the Texas Constitution: 80% maximum LTV, 2% fee cap (excluding appraisal, survey, title insurance), 12-day cooling-off period, one per year on the same homestead, and closing must occur at a lender, attorney, or title company office.
What is the maximum loan term on a VA cash-out refinance?
The lesser of the original loan term plus 10 years or 30 years and 32 days (VA Lenders Handbook Ch. 6, sec. f).
Can the VA funding fee be financed into the loan on a cash-out refinance?
Yes. The funding fee may be included in the loan amount, but the inclusion of the fee must not cause the loan to exceed 100% of the reasonable value. Any portion that would exceed 100% is paid in cash at closing (38 CFR 36.4306(a); Ch. 6 sec. g).
How We Researched This Page
Every factual claim on this page was verified against VA-hosted primary sources: 38 USC 3709 and 3729, 38 CFR 36.4306, the VA Lenders Handbook (Pamphlet 26-7) Chapter 6, the VA.gov funding fee schedule, and CFPB consumer guidance. Texas restrictions were sourced from the Texas Constitution as published by the Texas Legislative Council (through November 4, 2025 amendments). Where a requirement is lender-specific rather than VA-set, the text identifies it as such.
Resources Used
- 38 USC 3703(c)(4): Interest Rate Agreement (uscode.house.gov)
- 38 CFR 36.4312: Interest Rates (govinfo.gov)
- 38 USC 3709: Refinancing of Housing Loans (uscode.house.gov)
- 38 USC 3729: Loan Fee (uscode.house.gov)
- 38 CFR 36.4306: Cash-Out Refinance Loans (govinfo.gov)
- VA Funding Fee and Closing Costs (VA.gov)
- VA Lenders Handbook (Pamphlet 26-7), Chapter 6: Refinancing Loans (KnowVA)
- CFPB: Interest Rate vs APR (consumerfinance.gov)
- CFPB: Discount Points and Lender Credits (consumerfinance.gov)
- Texas Constitution, Article XVI, Section 50(a)(6) (Texas Legislative Council PDF)