VA Home Equity Loan Options

Home equity loans allow homeowners to convert the equity they’ve built in their homes into cash. In this guide, we’ll explain whether VA home equity loans exist, how home equity loans work, and what alternatives are available to veterans and service members who want to tap into their home’s value.

Can You Get a VA Home Equity Loan?

No, the VA does not offer or guarantee home equity loans or home equity lines of credit (HELOCs). VA loans are backed by a federal guarantee, and the Department of Veterans Affairs does not insure second-lien loans, which is how most home equity loans are structured.

That said, the lack of a VA-backed home equity loan doesn’t mean VA borrowers are out of options. Veterans can still:

• Take out a home equity loan or HELOC from a civilian or military-friendly lender, or
• Use a VA cash-out refinance to access equity through a new first-lien VA loan

Understanding why VA home equity loans don’t exist starts with knowing how mortgage liens work.

First- vs. Second-Lien Loans

When you take out a traditional mortgage to buy a home, that loan becomes the first lien on the property. This gives the lender primary repayment rights if the home is sold or foreclosed on.

Home equity loans and HELOCs are typically second-lien loans. They sit behind the primary mortgage, meaning the lender only gets paid after the first-lien loan is satisfied. Because this structure carries more risk for lenders, not all institutions offer home equity loans, and the VA does not guarantee them.

This is the key reason VA home equity loans don’t exist.

How Do Home Equity Loans Work?

Your home equity is the difference between your home’s current market value and the amount you still owe on your mortgage.

For example:

• Home value: $400,000
• Remaining mortgage balance: $250,000
• Available equity: $150,000

Lenders use this information, along with your loan-to-value (LTV) ratio, to determine how much you can borrow. If a lender allows borrowing up to 90% LTV, the maximum total debt on the home would be $360,000 ($400,000 × 90%).

From there, the lender subtracts your existing mortgage balance:

• $360,000 maximum loan amount
• – $250,000 current mortgage
• = $110,000 available for a home equity loan (before closing costs)

This calculation applies whether your first mortgage is a conventional loan or a VA loan.

Can You Take Out a Home Equity Loan with an Outstanding VA Mortgage?

As stated, borrowers cannot take out a VA home equity loan. But, you can take out a home equity loan on top of your current VA loan. In other words, if you have an outstanding VA loan on your home, the VA allows you to take out a home equity loan to access the equity. You just won’t receive the guarantee of a VA-backed loan on this new loan.

Continuing the above example, assume that the outstanding $250,000 mortgage was a VA loan. The borrower could not take out a VA home equity loan to access his or her remaining equity. But, if a lender offered a home equity loan with the stated 90% LTV terms, the VA would not prevent you from taking out that additional $110,000 loan as cash. It just wouldn’t be a VA-guaranteed loan.

Qualifying for a Home Equity Loan

The VA may allow home equity loans on top of VA loans, but this doesn’t mean you’ll qualify for one of these loans. Borrowers still need to meet all of the lender-specific requirements to qualify for a new loan.

Home Equity Loan Options with Military Friendly Lenders

If you meet the basic financial requirements to qualify for a home equity loan, you next need to identify a specific lender. In this section, we’ll outline military credit unions that offer these loan products.

Pentagon Federal Credit Union (PenFed)

PenFed opened in 1935, making it a long-established financial institution supporting the military. Today, it serves more than 2 million members and holds over $25 billion in assets. Despite its name, you do not have to be a military member or veteran to join PenFed. Instead, any US citizen or permanent resident can apply, needing only to maintain a savings account with a $5 minimum balance.

Navy Federal Credit Union (NFCU)

Seven Department of the Navy employees founded Navy Federal Credit Union (NFCU) in 1933 to help themselves, co-workers, and family members achieve financial goals. In particular, these founders imagined a credit union offering loans with affordable rates and reasonable terms. NFCU has opened its membership to all military members, veterans, Department of Defense employees, and their families. It currently has over 10 million members.

VA Cash-Out Refinance Loan

A VA cash-out refinance lets eligible homeowners tap into their home equity by replacing their current mortgage with a new, larger loan. The new loan pays off the existing mortgage, and the remaining amount is received as cash.

Example: If your home is worth $400,000 and you owe $250,000, a 90% LTV VA cash-out refinance would allow a new loan of $360,000. After paying off the $250,000 balance, you’d receive $110,000 in cash (before closing costs).

Because the original mortgage is paid off, a VA cash-out refinance is considered a first-lien loan, not a second lien like a home equity loan. This also means you can use it to refinance either a VA or non-VA mortgage.

The VA allows cash-out refinances up to 100% LTV, capped at the conforming loan limit in most areas (and higher in some high-cost counties). However, not all VA-approved lenders offer 100% LTV, so loan limits and terms vary by lender.

Military Friendly Lenders That Offer HELOCs

A home equity line of credit (HELOC) is another way homeowners can access their home equity.

Unlike a home equity loan, a HELOC works more like a credit card. You’re approved for a maximum credit limit based on your available equity, but you only borrow what you need, when you need it. Interest is charged only on the amount you’ve drawn, not the full credit line.

Example: If you qualify for a $90,000 HELOC and use $30,000 to replace a roof, you’ll only pay interest on the $30,000 balance. Once you repay it, your full $90,000 credit line becomes available again. This revolving structure often makes HELOCs more flexible than home equity loans.

As with home equity loans, the VA does not offer HELOCs. Instead, borrowers can work with military friendly lenders to secure one.

Home Equity Loan and HELOC Options with Civilian Lenders

Military members and veterans aren’t limited to military-friendly lenders when shopping for home equity loans or HELOCs. Civilian lenders (including local credit unions, regional and national banks, and mortgage companies) also offer competitive options worth comparing.

Each lender type has tradeoffs. Local credit unions often have more flexible qualification requirements and less red tape. Larger banks may be stricter but can sometimes offer better pricing due to greater resources. Mortgage companies specialize in home loans, which can lead to a smoother application and servicing experience.

No matter which route you take, comparison shopping matters. At a minimum, review rates and terms from at least three lenders. Even small differences can add up to thousands of dollars over the life of a loan.

Final Thoughts

Unfortunately, the Department of Veterans Affairs does not offer a VA home equity loan. This reality should not stop military members and veterans from seeking VA home equity loan alternatives. In particular, VA cash-out refinances, HELOCs, home equity loans without a VA guarantee all provide great options for turning your home’s equity into cash.