Veteran homeowner reviewing VA funding fee and refinance costs
VA Cost Guide

VA Cash-Out Funding Fee

For VA cash-out refinances, the funding fee can change the loan amount and payment. Exemption status should be checked early, not guessed.

Reviewed by Chad Bucceri, NMLS #118109 on October 13, 2026NMLS #407536Subject to credit approvalCall (888) 272-8264
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The funding fee is one of the first cost checks on a VA cash-out refinance.

VA says the funding fee is a one-time payment that helps lower the cost of the program for taxpayers because VA loans do not require down payments or monthly mortgage insurance. On VA-backed cash-out refinances, VA publishes separate first-use and after-first-use funding fee rates.

Some borrowers are exempt, including certain borrowers receiving or eligible for VA compensation for service-connected disability, surviving spouses receiving DIC, and active-duty Purple Heart recipients with required evidence.

Bottom line: the same VA cash-out idea can look very different when the borrower is exempt versus when the fee is financed.

First use, later use, and exemption status change the number.

Published cash-out rates

VA lists cash-out refinance funding fee rates of 2.15 percent for first use and 3.3 percent after first use, effective April 7, 2023.

Exempt borrowers

VA lists several exemption categories, including borrowers receiving VA compensation for service-connected disability and surviving spouses receiving DIC.

Financing the fee

VA says the funding fee may be included in the loan and paid over time, but financing it increases the loan amount.

How to keep the funding fee from hiding inside the refinance pitch.

A cash-out refinance can still make sense with a funding fee, but the borrower needs to see the actual cost.

Fee versus monthly MIP

VA loans do not require monthly PMI, which can help compared with some other loan types. The funding fee, if owed, still belongs in the side-by-side comparison.

Exemption documentation

Exemption should be verified with the proper documentation. A verbal "I should be exempt" is not enough to quote the final result.

Refund timing

VA notes some borrowers may be eligible for a refund if compensation is later awarded with an effective date before closing. That is a VA determination, not a lender promise.

Do not let a refinance pitch outrun the math.

"Financed means free"

No. Financing can reduce cash to close, but it increases the loan balance and interest paid over time.

"All veterans are exempt"

No. Exemption depends on VA-defined categories and documentation.

"The fee decides the whole refinance"

No. Rate, term, closing costs, debt payoff, monthly cash flow, and borrower timeline also matter.

Want the VA cash-out cost checked before you decide?

Bring the COE, exemption evidence, current payoff, value estimate, debt list, and desired cash-out amount. We will show the fee and cost structure clearly.

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What borrowers say about Texana Bank

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