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As beneficial as homeownership is, it can also come with just as many stressors with many of them being financial. That’s why VA home loan borrowers should look to a VA cash-out refinance to ease some financial burden and prepare for unexpected expenses.

VA cash-out refinancing allows current VA borrowers to tap into their home equity in exchange for cash.

Because the U.S. Department of Veterans Affairs backs VA mortgages, they may offer more favorable rates and terms, making cash-out refinancing an opportunistic option for homeowners aiming to improve their financial situation.

Learn more about VA cash-out refinancing, how much you can borrow, and how you can use the funds. We’ll help you gain a better understanding of how these VA loans can help you meet your financial goals.

How does VA cash-out refinancing work?

VA cash-out refinances work similarly to a standard refinance meaning that you’ll take out a larger home loan to replace your current home mortgage.

Your home’s appraised value is used to determine your new mortgage, and the nominal difference between the value of your home and how much you currently owe on your mortgage determines how much cash you get back.

Let’s break that down with a refinance example

If your home is valued at $350,000 and you currently owe $200,000 on your home mortgage, that means you have $150,000 available in equity that’s accessible to you.

With a VA cash-out refinance loan, you can potentially access up to 100% of your home’s appraisal. However, it’s important to note that not all lenders will allow you to access the full amount.

VA cash-out refinance loans are available to active service members, veterans, Reservists, National Guard members, and qualifying spouses. You must provide your Certificate of Eligibility (CoE) to confirm you meet the minimum requirements for a VA loan.

Additional requirements can include, but are not limited to:

  • Credit score requirements: VA loans have no minimum requirement, but a higher score increases a lender’s confidence that you will make payments on time and may help you qualify for a lower mortgage interest rate
  • VA entitlement amount: Your CoE will confirm how much you can borrow
  • DTI ratio: Acceptable DTI ratio is typically around 41%
  • Home equity: The more home equity you have, the more funds you can access
  • VA funding fee: A percentage of your refinance mortgage that goes to the VA
  • VA appraisals and inspections: These are required to move forward in the VA cash-out refinance process and must be done by VA-approved professionals
  • Occupancy requirements: The property must be your primary residence

Work closely with a VA-approved lender who will guide you through the application process and provide specific details regarding eligibility and requirements based on your situation.

How much can you refinance for?

The amount of funds you can receive from refinancing will depend on several factors, such as the current market trends, your home’s appraisal, your existing mortgage, and your lender’s limitations.

While interest rates have been on the incline, home prices have steadily been increasing and are expected to continue to increase. This is good news for homeowners looking to refinance as this means that the value of their homes likely won’t decrease soon.

An appraisal is required to determine precisely how much your home is worth. Typically, your lender can order an appraisal to streamline the process.

Your existing mortgage will also determine how much you can refinance, as it’s the amount that will need to be paid off by your new mortgage. The more you’ve paid on your current mortgage, the more you can access.

Lastly, your lender may have their own limitations on when you can use your home equity to refinance. On the lower end, you can apply when you have at least 25% equity in your home.

What can you use the funds for?

How you use the funds depends on your personal situation.

You can use the funds to improve your current financial situation with an emergency fund, pay for a planned large expense, or even invest.

Some common ways to use funds from a VA cash-out refinance include:

  1. Consolidate debt
  2. Home improvements
  3. Savings
  4. Investments
  5. Cover expenses or bills.

There is no limitation to what you can use the funds for. However, it’s critical to make sure that you have enough home equity to get the funds you need.

Using a refinance calculator, you can further determine if using the funds from a VA cash-out refinance is worth it.

While the numbers and expected outcomes are only estimates, these tools help you distinguish if a VA cash-out is the right choice for you.

Getting started with The Federal Savings Bank

When you’re ready to take the next step and apply for a VA cash-out refinance mortgage, work with a qualified, VA-approved lender, like The Federal Savings Bank.

We’re a veteran-owned and operated lender—we’ve been where you are before. Our knowledge and experience can help support you in a refinance for your unique situation.

With our team of Veteran Lending Specialists by your side, we know that you’ll be in the right hands to help you achieve your homeownership dreams and financial goals.

Get started refinancing with The Federal Savings Bank today—home begins here.


Subject to credit approval. Terms and conditions may apply. Subject to VA eligibility requirements. Property insurance is required on all loans secured by property.

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to you individual situation.