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VA Cash-Out Refinance Loan Fees and Limits

Funding Fee

As with your original VA purchase loan, the VA collects a funding fee on your refinance loan. It is the only fee that is required by the VA. Veterans who receive disability benefits are exempt from the funding fee requirement. The chart below tells you what your funding fee for a cash-out refinance loan will be. This chart applies to any VA refinance loan, whether you receive cash back or not, except for the streamline refinance (IRRRL), which has a flat funding fee of 0.5%.

Type of Veteran Percentage for First-time Use Percentage for Subsequent Use
Regular Military 2.15% 3.3%
Reserves/National Guard 2.4% 3.3%

If you’re using the cash-out refinance to convert a conventional loan to a VA loan, you will pay the first-time use funding fee. If you’re refinancing a VA loan, however, you’ll pay the percentage for subsequent use of the VA benefit.

VA funding fees are small compared to all the savings you get with a VA loan.

VA funding fees are small compared to all the savings you get with a VA loan. The fee helps sustain the VA lending program, which is not funded by taxpayer dollars or the funds from other benefits programs that the VA offers. The funding fee is set and collected by the Department of Veterans Affairs.

Closing Costs

Closing costs can vary quite a lot, but 3% to 5% is considered fairly standard in most areas of the country. Closing costs are not technically covered by a VA cash-out refinance. But you can achieve the same effect by carefully structuring your loan’s contract. The loan amount will be the price of the new loan (based on the value of the house), plus the obligatory VA funding fee. If your home appraises for more than the amount of the loan, it may be possible to include your refinance closing costs in your new loan.

Each local VA office sets the closing costs the veteran is allowed to pay, based on what is both reasonable and customary in that geographic area. The veteran is not allowed to pay any other costs associated with the loan other than the ones on the VA’s list.

Loan Restrictions

The loan amount can be no more than 100% of your home’s appraised value, which can only be determined by a new appraisal on your property. This important step in the refinance process tells you how much you are able to borrow, although you do not have to borrow the full amount.

The VA does not set any kind of a cap on the amount of money you can borrow with a VA loan.

The VA does not set any kind of a cap on the amount of money you can borrow with a VA loan. However, the VA does set a limit on how much of the loan they can be held liable for. This will usually affect the amount of money that you can borrow. These loan limits vary depending on your geographic location. Limits are subject to change each year.

The VA pledges to guarantee around a quarter of the loan amount. The first layer of entitlement is $36,000, and the second layer is $68,250. This equals $104,250, and most lenders will generally loan four times the amount guaranteed by the VA, which is $417,000 in most parts of the country. The VA has higher limits in other parts of the country.

You must have sufficient VA entitlement for the cash-out refinance. If a VA loan already exists on the property you are refinancing, your entitlement can be restored for the refinance.

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