Your current loan
If you have a VA loan with favorable terms, an IRRRL or a second lien may cost less.
Your entitlement
A VA cash-out uses entitlement; your COE shows what is available.
Questions to weigh before using a VA cash-out refinance.
Funding fee exemption
Disability compensation recipients are exempt, which changes the math significantly.
Purpose of the funds
Consider whether home improvements, debt payoff or other uses improve your finances long term.
Your current loan
If you already have a VA loan and only want a lower rate, an IRRRL is often simpler and costs less. A cash-out makes more sense when you need equity or want to replace a non-VA loan.
Entitlement
A VA cash-out uses your entitlement. If entitlement is tied up in another VA loan, check your Certificate of Eligibility to see what remains.
Funding fee
The cash-out funding fee is higher than the IRRRL fee. Veterans receiving VA disability compensation, and some others, are exempt; your COE shows exemption status.
Purpose
Using cash for home improvements may add value, while using it for spending increases debt secured by your home. Decide the purpose first.
Benefit tests
VA requires a net tangible benefit for every cash-out refinance, and the lender must give you a comparison of the old and new loans.
General education only; confirm current rules with official sources and a licensed lender.
Sources
Sources checked 10/23/2026.