VA Cash-Out Refinance: Everything You Need to Know for 2025

Over 3.7 million veterans and service members hold VA-backed home loans. Yet, many aren't leveraging their home's equity to its fullest. A VA cash-out refinance lets you replace your current mortgage with a new VA loan. This gives you the power to access your home's equity for consolidation, improvements, or other needs.

This guide will cover VA cash-out refinancing in 2025. It will explore the benefits, eligibility, and costs. Use it to make informed decisions and maximize your home's value.

A VA Cash-Out Refinance loan is a mortgage option designed for veterans and active-duty service members. It allows eligible borrowers to refinance their existing mortgage and withdraw cash from their home equity.

This option is different from traditional refinancing. It replaces the current loan and gives the borrower a new loan amount. This amount can go up to 100% of the home's appraised value, even exceeding the original mortgage balance.

In a VA loan, "cash-out" means refinancing your mortgage for more than you owe. You receive the difference in cash.

For example, if your home is worth $300,000 and you owe $200,000 on your mortgage, a VA Cash-Out Refinance could let you refinance up to 100% of your home's value. It could provide you with up to $100,000 in cash, depending on lender policies.

Here are the benefits of VA Cash-Out Refinance over conventional refinancing and home equity loans:

• No Mortgage Insurance: Unlike conventional loans, VA loans don't require private mortgage insurance (PMI). This can save you significant monthly costs.
• High Loan-to-Value Ratio: Borrowers can refinance up to 100% of their home's appraised value. This provides access to more cash than other options, which typically cap at 80%.
• Lower Interest Rates: VA loans often have lower rates than conventional loans. This is due to backing by the Department of Veterans Affairs.
• Flexibility in Use of Funds: The cash obtained can be used for various purposes, without restrictions. This allows you to address urgent financial needs or invest in improvements.

To qualify for a VA Cash-Out Refinance loan in 2025, borrowers must meet criteria set by the Department of Veterans Affairs and lenders.

Eligible borrowers include veterans who served on active duty and some National Guard and Reserve members. Generally, active-duty service members must have served at least 90 continuous days.

Additionally, veterans must meet specific service requirements based on their dates of service. Surviving spouses may also qualify under certain conditions.

The Certificate of Eligibility (COE) is important for obtaining a VA loan. It verifies that you meet the necessary service requirements.

You can request your COE online through the VA's website or have your lender obtain it on your behalf. Having this certificate simplifies the application process and ensures you are eligible for VA benefits.

It's essential to understand the rates and costs of a VA Cash-Out Refinance. This is key for effective budgeting.

VA Cash-Out Refinance loans typically have interest rates slightly higher than standard VA loans. This difference usually ranges from 0.125% to 0.25%.

However, it can change based on factors like credit score and loan-to-value ratio. Despite this, VA Cash-Out Refinance rates tend to stay lower than conventional cash-out refinance options due to government backing.

The funding fee for a VA Cash-Out Refinance varies based on whether it’s your first use or subsequent use:

• First-time use: 2.15% of the loan amount.

• Subsequent use: 3.3% of the loan amount.

For example, on a $300,000 loan, a first-time user would pay a funding fee of $6,450, while a subsequent user would pay $9,900.

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The process of obtaining a VA Cash-Out Refinance can be straightforward if you follow these steps.

Start by researching VA-approved lenders. Compare interest rates, fees, and customer reviews to find a lender that aligns with your financial goals. Remember, rates and terms can vary, so shopping around is crucial.

The COE verifies your eligibility for VA loan benefits. You can obtain it through:

• Online: Via the VA's eBenefits portal.
• Lender: Many lenders can assist in obtaining the COE on your behalf.
• Mail: By completing VA Form 26-1880 and mailing it to the VA.

Having your COE ready streamlines the application process.

Gather necessary documents, including:

• Proof of Income: Recent pay stubs, W-2s, or tax returns.
• Credit Information: Authorization for the lender to pull your credit report.
• Asset Statements: Bank statements and information on other assets.

Organizing these documents in advance can expedite the underwriting process.

At closing, you'll sign the final documents and pay any remaining fees. Closing costs for VA cash-out refinances typically range from 3% to 5% of the loan amount. These can include appraisal fees, title insurance, and the VA funding fee. Some costs may be negotiable or covered by lender credits.

A VA Cash-Out Refinance can be a powerful tool for veterans. It helps them access their home equity while enjoying lower rates and no mortgage insurance. It's important to assess your financial goals and current market conditions. Moreover, choosing the right lender makes sure you maximize benefits.

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There's no limit to how many times you can refinance a VA loan. However, each refinance must meet specific criteria. This includes a 210-day wait between each refinance.

Yes, you can refinance a VA loan to a conventional loan. This process, called a VA-to-conventional refinance, requires you to meet conventional loan criteria.

For an Interest Rate Reduction Refinance Loan (IRRRL), you need to wait 210 days. You also have to make six monthly payments on your current VA loan before you can refinance.

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Compare options, calculate payments, and get expert guidance all in one place

Get Pre-approved