VA Home Equity Loans | Requirements 2026
There is no VA home equity loan. The Department of Veterans Affairs doesn’t have a home equity loan program.
However, VA borrowers still have options for accessing home equity, specifically the VA cash-out refinance loan program.
Or, you can apply for a non-VA loan to access the home equity you’ve built with your VA mortgage.
Ready for a VA cash-out refinance? Start here (Nov 4th, 2026)
In this article:
- What is a home equity loan?
- VA cash-out refinance: Alternative to home equity loans
- How to get a VA cash-out refinance
- HEL, HELOC, or cash-out refinance
- Pros and cons of all 3 home equity loan types
- VA home equity loan FAQs
- Where do I apply for home equity loans?
Is there a VA home equity loan?
For decades, the Department of Veterans Affairs has been helping active duty service members and veterans become homebuyers.
One of the biggest benefits of homeownership is the ability to use your home’s built-up value, which lenders call your home equity, in other parts of your financial life.
As a VA homeowner, you’ll have several ways to leverage your home equity, but only one that’s backed by the VA itself: the VA cash-out refinance.
To get a second mortgage to access your equity, you’d need to use a non-VA loan product.
Your VA home equity options
VA borrowers looking to tap their home’s equity for cash can do so in one of three ways:
- Home equity loan (HEL): A one-time, lump-sum loan, often with a fixed interest rate. These loans are not offered by the VA and exist concurrently with your existing VA mortgage.
- Home equity line of credit (HELOC): Rather than a lump sum, this is a maximum loan limit that allows you to borrow, repay and borrow on a continuing basis. As with a HEL, these loans are not available through the VA and function as a second mortgage.
- VA cash-out refinance: Though not technically considered a home equity loan, a VA cash-out refinance allows you to access your home’s equity as cash while still taking advantage of the VA loan program’s many benefits. This loan replaces your existing mortgage.
Check your VA mortgage rates. Start here (Nov 4th, 2026)
What is a home equity loan?
Home equity is your home’s current value minus what you owe on your mortgage. If your home is worth $200,000 and you owe $100,000 on your mortgage, you have $100,000 in home equity.
A home equity loan lets you use your home equity as collateral on a new loan. It’s like a personal loan except it’s secured by your home’s value, so you can often get a lower interest rate.
In general, lenders let you borrow a percentage of your home’s appraised value, minus the amount you currently owe on your primary mortgage loan. Each lender sets its own percentage.
If your lender lets you borrow 80 percent of your $200,000 home, your total borrowing limit would be $160,000. But if you owed $100,000 on your primary loan, that would leave you with $60,000 to borrow.
You could use the money you borrow on anything. But since you’re spending from your home’s value, it makes more sense to pay for long-term needs like home improvements or debt consolidation.
Types of home equity loans
There are two types of home equity lending and each one is suitable for slightly different situations. The Department of Veterans Affairs does not guarantee either one of these loan options:
- Home equity loan (HEL): The home equity loan is similar to your first mortgage: it’s a one-time, lump-sum loan, often with a fixed interest rate. You get all the money up front, then pay a fixed principal and interest payment each month until the sum is fully paid. It’s often called a second mortgage because your primary, or first, mortgage gets paid off first if the home is sold to repay the debts.
- Home equity line of credit (HELOC): A HELOC works like a credit card backed by your home equity. You have a maximum loan limit and can withdraw funds when needed. You can borrow, repay, and borrow again during the draw period. This type of loan is great for home improvement projects where you need smaller amounts of cash as you go along, or for homeowners that prefer to part out projects into smaller tasks. It can also help if your income varies a lot and you need to address cash-flow issues as they arise.
Advantages of home equity loans
Because they use your home equity as collateral, interest rates for a home equity loan or home equity line of credit (HELOC) are typically lower than interest rates on credit cards and personal loans.
This is why many homeowners find this type of financing perfect for home renovations, car purchases, or even to finance a child’s college education. They’re also often used to consolidate debts that are becoming burdensome.
Check your VA refinance eligibility. Start here (Nov 4th, 2026)
Why isn’t there a VA home equity loan or HELOC?
The Department of Veterans Affairs does not guarantee home equity loans or HELOCs because federal law generally requires a VA-guaranteed home loan to be secured by a first lien. A narrow exception covers loans for repairs, alterations, or improvements.
A home equity loan or HELOC is normally a second lien, so it doesn’t meet that rule.
But even though the VA doesn’t guarantee home equity loans, you can still borrow from an independent lender, while keeping your VA home loan as your first mortgage. Like your first mortgage, if you fail to keep up on payments with a second mortgage, you could lose your home.
The VA cash-out refinance is an alternative to home equity loans
The VA does not offer home equity loans, but it does guarantee another way for homeowners to access home equity: VA cash-out refinance loans. Cash-out refinancing replaces your existing mortgage with a new, bigger one, and you take the difference out in cash.
In this way you could borrow against your equity without having two mortgage loans, and your loan would still be backed by the Department of Veterans Affairs.
Advantages of VA cash-out refinancing
The VA cash-out refi can be especially useful when interest rates are low. Here are some of its main advantages:
- High loan-to-value ratio (LTV): Unlike most home loans, the VA cash-out refi lets you access up to 100% of your home equity, because the loan can reach 100% of the home’s VA appraised value, including the funding fee. Conventional cash-out refis usually stop at 80% LTV on a one-unit primary home, which leaves at least 20% of the home’s value untapped
- Will refinance any loan type: The VA cash-out can refinance any mortgage loan, including FHA and USDA loans. (The VA Interest Rate Reduction Refinance Loan (IRRRL), or streamline refinance, works only if you already have a VA loan)
- No mortgage insurance required: Even when you have a high loan-to-value ratio, the VA doesn’t require monthly mortgage insurance. Instead, borrowers who aren’t exempt pay the one-time VA funding fee
- VA mortgage protections apply: The VA won’t let a lender charge more than a flat 1% of the loan amount as an origination fee, though reasonable discount points can be added
- VA funding fee can be financed: If necessary you could finance your VA funding fee into your new loan, as long as you stay within the VA’s 100% limit and your lender’s LTV rule. For loans closed before June 9, 2034, the fee is 2.15% of the loan for first use or 3.3% for later use, and some borrowers, including veterans who receive VA disability compensation, are exempt
Sometimes lenders enforce stricter underwriting rules than the VA requires, especially when it comes to loan-to-value ratios or credit score requirements.
Check with your loan officer about your lender’s specific rules.
Check your VA refinance eligibility. Start here (Nov 4th, 2026)
Should you consider a VA cash-out refinance?
Before you apply for a VA cash-out refinance ask yourself the following questions to determine whether it’s the right mortgage loan product for you:
- Can I comfortably afford my current monthly payments?
- Do I have enough income to afford a higher monthly payment?
- Do I have enough home equity to make a refinance worthwhile? (The VA allows using up to 100% of your equity, but your lender may not)
- Is my credit score high enough to qualify? (The VA sets no minimum credit score, but lenders set their own)
- Am I comfortable paying closing costs? (These are similar to your original mortgage and can be paid in cash or, within the 100% limit, added into the new loan)
- How will my interest rate change? It’s rarely wise in the long term to refinance to a higher rate. Consider a home equity loan or HELOC if a new VA cash-out refi would raise your rate
How to get a VA cash-out refinance
A VA cash-out refinance is more complex than the VA’s IRRRL streamline loan, which generally doesn’t allow cash back.
It requires full credit underwriting and a VA appraisal. Here are the steps you’ll need to follow:
1: Are you eligible for a VA cash-out refinance?
The best candidates for a VA cash-out refi have:
- A strong credit profile: The VA sets no minimum credit score, but lenders set their own. The VA uses a 41% debt-to-income ratio (DTI) as a guide, not a hard limit, and also looks at residual income (the money left each month after major expenses)
- Enough home equity: If you don’t have enough home equity, there’s no way to benefit from this loan. Subtract your current mortgage balance from your approximate home value to measure your available equity
Missing either piece of this puzzle could mean it’s not the right time to get a VA cash-out refinance loan. For example, if you just closed on an existing VA loan and made no down payment, you probably won’t have enough equity to benefit quite yet. Refinancing a VA loan also takes at least 210 days and six monthly payments on that loan. In addition, you need a Certificate of Eligibility (COE) and must live in the home you’re refinancing.
2: Shop around with VA-approved lenders
The VA guarantees part of each home loan, making these loans more affordable, but it generally doesn’t lend the money. Instead, private lenders make the loans to eligible veterans and active duty service members.
You’ll have a lot of private lenders to choose from, including big national banks, small credit unions, and online lenders. Rates and fees vary by lender, so be sure to shop around.
3: Apply for your Certificate of Eligibility (COE)
Your Certificate of Eligibility is your ticket for accessing the VA’s home loan program.
You’ll need to show a COE to your lender even if you already have a VA loan. VA Form 26-1880 includes a cash-out option for restoring the entitlement on your current VA loan. Apply online at VA.gov or using this form, or let your lender do it on your behalf.
4: Apply for your loan and follow the lender’s directions
To speed your loan application process along, make sure you have copies of your W-2 forms and recent pay stubs nearby before you begin. It’ll also help to have your most recent mortgage statement available.
Your lender will order a new appraisal to find the current market value of your home.
Your loan officer should be available to help guide you through the application process. If the lender asks for additional documents, provide them as quickly as you can to avoid delays.
5: Prepare to close on the new loan
The time it takes to close on a VA cash-out loan varies. Your lender will schedule a closing date, and it should take care of most of the little details.
But you’ll still have some decisions to make and a lot of papers to sign. For example, will you pay the VA funding fee out of pocket or finance it into your loan? There will be some other closing costs to cover as you transition from your old loan to the new one.
Verify your eligibility for a VA cash-out refinance loan (Nov 4th, 2026)
HEL, HELOC, or cash-out refinance: How to decide?
You may already know which home equity loan product is best for you and your circumstances.
But, if not, below is a quick analysis of each loan type. All of these products require you to put your home on the line and you could face foreclosure if you fall behind in payments.
Home Equity Loan (HEL)
A home equity loan provides a solid loan for conservative borrowers. It is:
- Safe and predictable: You’ll get fixed loan terms, fixed payments, and fixed rates (if you opt for a fixed-rate loan), so you know exactly what you owe each pay period and for how long
- Inexpensive to set up: Typically HELs have lower closing costs than a refinance
Home Equity Line of Credit (HELOC)
A home equity line of credit works well when you need flexibility. It is:
- Not set in stone: Borrow, repay, and borrow again up to your credit limit, much like you would with a credit card
- Inexpensive to set up: Similar to a HEL and usually cheaper than a refinance
- More fluid: You pay interest only on your monthly balance instead of the full credit line. Most HELOCs have a variable interest rate
VA Cash-Out Refinance
The VA cash-out refinances your entire mortgage balance while also giving you access to home equity. It is:
- A chance for lower interest rates: Since it replaces your primary mortgage loan, VA cash-out refinancing is a chance to get a lower interest rate if market rates are below your current rate
- Possibly a lower “total cost of borrowing”: If your new rate is lower, you may save on long-term interest costs by having only one VA loan with no ongoing mortgage insurance fees
- Expensive to set up: You’ll have to pay closing costs and other fees on a much larger loan amount, but those can be added to the new mortgage amount
Ready for a VA cash-out refinance? Start here (Nov 4th, 2026)
Pros and cons of all 3 loan types
Home equity loan
| Pros | Cons |
| Fixed-rate, term, and payments | Interest charged on lump sum |
| Lower closing costs | Inflexible repayment period |
| Receive a lump sum | Creates second monthly mortgage payment |
Home equity line of credit
| Pros | Cons |
| Draw funds as needed | Adjustable-rate could increase |
| Pay interest only on drawn funds | Draw period ends (10 years in some plans) |
| Some lenders waive up-front costs | Creates second monthly mortgage payment |
VA cash-out refinance
| Pros | Cons |
| Can lower rate on entire mortgage balance | Can increase interest by extending loan term |
| No mortgage insurance required | Closing costs will be more expensive |
| Can refinance any other mortgage type | Could increase interest rate if you have a low rate already |
VA home equity loan FAQs
Does the VA have a home equity loan?
The VA does not offer home equity loans but VA borrowers can still access home equity through a VA cash-out refinance or a non-VA second mortgage.
Does the VA have a home equity line of credit (HELOC)?
The VA does not offer a home equity line of credit (HELOC). VA homeowners who want a HELOC can use non-VA loan products, though.
What are equity reserves on a VA loan?
“Equity reserves” is not a defined term in VA loan rules. In general use, it’s another term for home equity. It’s the part of your home’s value that you own outright because it exceeds the amount of money you owe your lender.
If you owed $100,000 on your mortgage but your house was worth $200,000, you’d have $100,000 in equity reserves. If you get a home equity loan or line of credit, you’ll use part of your equity reserves.
Can you lose your house with a home equity loan?
Yes, lenders who approve your home equity loan (or HELOC) will place a second lien on your home. This lien gives the lender the right to claim and sell your home if you default on the debt. A lien generally stays in place until you pay off the loan and the lender releases it.
What is the max LTV for a VA cash-out refinance?
The VA could allow you to borrow against all of your home value. In lender-speak, this means you can get a loan with 100% loan-to-value (LTV), including the funding fee. But just because the VA is OK with 100% LTV doesn’t mean your lender will be. Be sure to ask your loan officer in advance if you’d like to tap all your home equity.
Can you refinance an FHA loan to a VA home equity loan?
Even if your current home loan is not a VA loan, the VA cash-out refinance can still work. The VA cash-out refinance can pay off any other loan type, including an FHA loan, while also giving you access to your home’s stored up value.
Where do I apply for home equity loans?
You can look for a home equity loan at your local bank or credit union. But shop around online, too, so you can compare rates and fees.
Home equity loans and lines of credit are not backed by the VA, so you’ll have to follow your lender’s rules. For example, lenders generally cap the loan at a percentage of your home’s appraised value, minus what you owe, so you may not be able to access all of your equity.
The VA cash-out refinance is backed by the VA so it’s possible to tap all of your home’s equity without paying mortgage insurance. You’d have to refinance your entire mortgage balance to make this work.
To get a VA cash-out refi, shop around between several VA-approved lenders online and in person.
Verify your eligibility for a VA cash-out refinance loan (Nov 4th, 2026)
