VA's two cash-out refinance types and the protections each one carries
VA cash-out: Type I and Type II
Classification
VA splits cash-out refinances into two types. In a Type I, the new loan amount, including the funding fee, does not exceed the payoff of the loan being refinanced. In a Type II, it does. The type decides which borrower protections apply, such as fee recoupment, which applies to Type I loans that refinance a VA loan, and the home equity comparison required on Type II loans.
Last reviewed against the primary sources listed below.
ToolType classifierTwo numbers, one type.RulesThe definitionsStraight from VA's circular.Type IType I in practiceConverting or rate-only.Type IIType II in practiceTaking more than the payoff.ProtectionsProtections by typeWhat applies when.Edge caseFee and typeWhen the fee tips it.AskLender questionsGet it in writing.New guideWhen the type changesHow changes to the loan amount during processing can change the cash-o.New guideType I vs IRRRLWhy a Type I cash-out refinance is not the same as a VA streamline ref.GlossaryKey termsPlain definitions with sources.GuideType II disclosuresThe extra disclosures VA requires when the new loan exceeds the payoff.GuideEntitlementWhat happens to VA entitlement when you take a cash-out refinance.PrintableLender questionsQuestions to bring to any lender, ready to print.
Independent, not official
This is not a government website. The definitions come from VA Circular 26-18-30.