VA Loan Refinancing: How It Works and When To Use It
Refinancing a VA loan replaces your current mortgage with a new VA backed loan. Most borrowers use an Interest Rate Reduction Refinance Loan to lower payments or stabilize from an adjustable rate to a fixed rate. Others use a cash out refinance to access home equity or to move a non VA loan into the VA program. Pick the option that fits your financial goal.
Quick Facts
- The IRRRL is streamlined and focuses on payment reduction, stability, and fast recoupment of costs.
- Cash out refinancing requires full underwriting and an appraisal and must be for your primary residence.
- Seasoning rules apply, including a waiting period and a minimum number of on time payments.
- Most closing costs and the funding fee can be included in the new loan in many scenarios.
- Every VA refinance must provide a clear and measurable financial benefit to the borrower.
Mini FAQ
What is an IRRRL?
It is a VA to VA refinance that aims to reduce monthly principal and interest or stabilize payments by moving from an adjustable rate to a fixed rate. It uses streamlined documentation and focuses on clear financial benefit.
What is a VA cash out refinance?
It replaces your mortgage with a new VA backed loan while giving you cash from home equity or converting a non VA loan into the program. It involves a full appraisal and standard income and credit verification.
Which is better for me?
Use an IRRRL if your goal is payment reduction or stability with a simpler file. Use cash out when you need equity funds or when you want to bring a non VA loan into the program. Compare both with a cost and benefit test.
Key Takeaways
- Two Main VA Refinance Options: Choose between a VA IRRRL (Streamline) or VA Cash-Out Refinance, each serving different goals.
- Lower Rates and Payments: Streamline refinancing helps reduce monthly mortgage payments with minimal documentation.
- Access Home Equity: Cash-out refinancing allows borrowing against your equity—up to 100% of your home’s appraised value.
- No PMI or Prepayment Penalties: VA refinances don’t require private mortgage insurance and offer flexible payoff terms.
- Relaxed Requirements: Streamline options require no appraisal or income verification for most borrowers.
- Funding Fees Apply: IRRRL fees start at 0.5%, while cash-out refinance fees can go up to 3.6%—though exemptions exist.
- Closing Costs Can Be Rolled In: Most closing costs can be financed into your new VA loan to avoid upfront expenses.
- Fast, Flexible Process: VA refinances are designed to be faster and more accessible than conventional loan options.
In this Article
What Is a VA Loan Refinance?
A VA loan refinance allows qualified Veterans, active-duty service members, and surviving spouses to replace an existing mortgage with a new VA-backed loan. Managed by the U.S. Department of Veterans Affairs, these refinances feature flexible guidelines, competitive rates, and the exclusive benefit of no private mortgage insurance (PMI).
There are two main types of VA refinancing options, each designed for different financial goals and circumstances:
- VA Streamline Refinance (IRRRL): The Interest Rate Reduction Refinance Loan is ideal for lowering your interest rate and monthly payment. It usually requires no appraisal, income verification, or credit check, making the process faster and easier.
- VA Cash-Out Refinance: A VA cash-out refinance lets you convert home equity into cash. Unlike most loan programs, it can refinance up to 100% of your home’s appraised value, providing maximum flexibility.
The Core Benefits of Refinancing with the VA
VA refinance options offer powerful benefits unavailable with most other mortgage products. From eliminating PMI to accessing full home equity, these features make refinancing more affordable and accessible for Veterans and Military families nationwide.
- No PMI: Conventional refinances with less than 20% equity require private mortgage insurance, but VA refinances never do. This exemption often saves Veterans hundreds of dollars per month in unnecessary costs.
- 100% Loan-to-Value: The VA Cash-Out refinance can allow you to borrow up to your home’s full appraised value, providing access to maximum equity when compared with conventional loan options.
- Streamlined Process: The IRRRL program is one of the simplest refinance products available, requiring minimal paperwork, no appraisal in many cases, and fast closings that reduce borrower stress.
- Flexible Credit Standards: The VA’s forgiving credit guidelines make refinancing possible for Veterans who may have experienced financial hardships or score setbacks compared to conventional qualification standards.
- Low Closing Costs: VA rules limit lender fees, and with IRRRL refinances, closing costs can often be rolled into the loan itself, reducing or eliminating out-of-pocket expenses for borrowers.
- Keep Your Benefit: Refinancing lets Veterans secure better loan terms while continuing to use the VA home loan benefit they earned, preserving access to future advantages if needed.
Today's VA Loan Rates for
| VA Loan Type | Interest Rate | APR | Points |
|---|---|---|---|
| 30-Year Fixed VA Purchase | 5.375 % | 5.794 % | 1.563 pts |
| 15-Year Fixed VA Purchase | 5.125 % | 5.889 % | 1.938 pts |
| 20-Year Fixed VA Purchase | 5.375 % | 5.939 % | 1.563 pts |
| 30-Year Fixed VA Jumbo Purchase | 5.375 % | 5.733 % | 0.875 pts |
| 30-Year VA Cash-Out Refinance | 5.990 % | 6.304 % | 0.250 pts |
| 30-Year VA Cash-Out Jumbo Refinance | 5.625 % | 5.921 % | 0.125 pts |
| 30-Year Streamline (IRRRL) Refinance | 5.375 % | 5.687 % | 2.000 pts |
| 30-Year Streamline (IRRRL) Jumbo Refinance | 5.750 % | 5.944 % | 0.625 pts |
- Assumptions: $275,000 loan amount, 30‑year fixed, primary residence, 1‑unit, 0% down, 720 FICO, 30‑day lock, full documentation.
- APR includes lender fees and any shown discount points; excludes third‑party fees (title, taxes, insurance, escrow) and may exclude the VA funding fee unless noted.
- Pricing and eligibility vary by borrower, property, state, loan purpose (purchase / IRRRL / cash‑out), LTV, lock period, and market conditions.
- Rates can change without notice and are not guaranteed until a lender issues a Loan Estimate and a rate‑lock agreement.
See our Advertising Disclosures for methodology and calculation details.
2025 VA Refinance Eligibility
Eligibility for a VA refinance is largely aligned with the requirements for obtaining a VA home loan. This ensures that the program is accessible to veterans, active-duty service members, and eligible surviving spouses who meet specific service criteria.
General Eligibility Requirements:
- Active-Duty Service Members and Veterans:
- At least 90 consecutive days of active service during wartime.
- At least 181 consecutive days of active service during peacetime.
- National Guard and Reservists:
- At least six years of service or 90 days on Title 32 orders, with at least 30 consecutive days served.
- Surviving Spouses:
- Spouses of veterans who died during service or from a service-connected disability may also qualify for a VA refinance loan.
VA Refinance Eligibility Calculator
Benefits of Refinancing Your VA Loan in 2025
Refinancing a VA loan can provide a range of financial advantages tailored to meet the needs of qualified borrowers. Whether you’re seeking to lower payments or access home equity, the benefits are substantial.
Lower-than-Average Interest Rates
VA loans typically offer interest rates that are below the market average, making refinancing a smart choice for many veterans. Lower rates mean long-term savings and reduced financial strain.
- Reduced interest rates compared to other loan types.
- Significant savings over the life of the loan.
Potential for Lower Monthly Payments
By securing a lower interest rate, borrowers can decrease their monthly mortgage payments, freeing up cash for other expenses or savings goals.
- Decreased monthly payments help improve financial flexibility.
- Lower rates lead to long-term savings on interest.
No Mortgage Insurance Requirement
Unlike FHA or conventional loans requiring private mortgage insurance (PMI) without a 20% down payment, VA loans eliminate this additional cost, saving borrowers hundreds monthly.
- No PMI required, reducing your monthly payment.
- Long-term savings on unnecessary insurance costs.
Relaxed Limits on Cash-Out Refinancing
A VA cash-out refinance allows you to borrow up to 100% of your home’s value, providing financial freedom for home improvements, debt consolidation, or other major expenses.
- Access up to 100% of your home’s equity.
- Ideal for covering major financial needs like renovations or education.
Refinance Up to 120% of Your Home’s Value
VA loans allow refinancing beyond the value of your home, offering a solution for those with underwater mortgages or fluctuating property values.
- Refinance even if you owe more than your home is worth.
- Excellent option for borrowers in high-cost or declining markets.
Relaxed Credit Score Requirements
The VA does not set strict credit score requirements, making refinancing accessible for more borrowers, even those with less-than-perfect credit histories.
- Lenders may approve scores as low as 580.
- Easier approval compared to conventional refinancing options.
Foreclosure Assistance
The VA offers resources and programs to help homeowners in financial distress avoid foreclosure. These include counseling and alternative repayment options.
- Access financial counseling and support through the VA.
- Explore alternatives to foreclosure, such as repayment plans or loan modifications.
Funding Fee Flexibility
The VA funding fee can be rolled into your loan, reducing upfront costs for refinancing. Certain groups, like disabled veterans, are exempt from this fee altogether.
- Roll the funding fee into your refinance amount to reduce initial costs.
- Disabled veterans, surviving spouses, and Purple Heart recipients are exempt from this fee.
2025 VA Loan Refinancing Options
VA loans offer two versatile refinancing options: the Interest Rate Reduction Refinance Loan (IRRRL) and the Cash-Out Refinance Loan. Each option serves a specific financial purpose, helping veterans and active-duty service members make the most of their homeownership journey.
VA Streamline (IRRRL) Refinance
The Interest Rate Reduction Refinance Loan (IRRRL), commonly called a “Streamline Refinance,” is designed for homeowners with an existing VA loan. It provides an easy way to lower monthly payments by reducing your interest rate, often without the hassle of income verification or a full appraisal.
Benefits of IRRRL:
- Lower Interest Rates: The VA Streamline refinance helps reduce monthly mortgage costs significantly by securing a lower interest rate, producing both immediate savings and substantial lifetime interest reductions for qualified Veterans and Military families.
- Minimal Documentation: Unlike conventional refinances, the IRRRL often requires no income verification or new appraisal, streamlining approvals and providing faster closings that eliminate common borrower frustrations and lengthy underwriting delays.
- No Out-of-Pocket Costs: Borrowers can roll allowable closing costs directly into their new loan balance, ensuring a true no-cash-required refinance process without sacrificing affordability or creating extra upfront expenses.
- Flexible Eligibility: The IRRRL is available exclusively to current VA loan holders, regardless of property equity levels, making it an option even for Veterans with minimal or no existing home equity.
This refinance option is best for Veterans focused on lowering their monthly payments and improving household cash flow without tapping home equity. More details on IRRRL requirements are available through the official VA website.
Cash-Out Refinance
A VA Cash-Out Refinance lets homeowners convert their home equity into usable cash by replacing their current mortgage with a new VA-backed loan. Unlike many refinance products, it is available to both VA and conventional loan holders, offering unmatched flexibility for multiple financial goals.
Benefits of Cash-Out Refinancing:
- Tap Into Equity: Borrow up to 100% of your home’s appraised value to fund essential expenses like home renovations, medical bills, tuition costs, or other major financial needs with VA-backed protections.
- Debt Consolidation: A VA Cash-Out refinance allows Veterans to pay off high-interest obligations such as credit cards or personal loans, replacing them with one lower-rate mortgage payment that improves monthly cash flow.
- Eligibility for Non-VA Loans: Unlike the IRRRL program, the Cash-Out refinance can replace conventional or FHA mortgages, letting more homeowners benefit from competitive VA terms and flexible refinance opportunities.
- Flexible Fund Use: Cash received from this refinance can be applied to emergencies, large purchases, educational expenses, or personal financial goals, giving Veterans complete freedom in how they use their equity.
This refinance option is best for homeowners seeking to leverage their property’s equity for cash while enjoying hallmark VA advantages, including competitive interest rates and the elimination of private mortgage insurance (PMI). View official cash-out requirements on the VA site.
How Soon Can You Refinance with a VA Loan?
The timing of when you can refinance with a VA loan depends on the type of refinance you pursue. The VA establishes minimum requirements for payment history and seasoning, while individual lenders may add their own eligibility rules to protect borrowers and ensure financial stability.
- VA Streamline (IRRRL): Borrowers must generally make at least six consecutive on-time payments and meet a “seasoning period” of 210 days from the date of their first payment before refinancing eligibility begins.
- VA Cash-Out Refinance: While the VA does not mandate a waiting period, many lenders impose internal rules such as requiring at least six months of homeownership or a specific number of payments before approval.
- Certificate of Eligibility: All refinance borrowers must meet VA eligibility requirements and provide a valid Certificate of Eligibility (COE), confirming their service history and entitlement before moving forward with the refinance application.
- Lender Requirements: Beyond VA guidelines, lenders may enforce minimum credit scores, income ratios, or loan-to-value limits to ensure financial responsibility and reduce risk, especially in higher-balance refinance transactions.
- Conventional to VA: Switching from a conventional loan to a VA-backed mortgage requires using the VA Cash-Out refinance option, as the IRRRL program applies only to existing VA loans.
Costs Associated with VA Refinancing
Refinancing a VA loan comes with specific costs, but understanding these fees upfront can help you plan effectively and avoid surprises. Here’s a breakdown of the key expenses:
VA Funding Fee
The VA funding fee is a one-time cost required on most refinances, ensuring the VA loan program remains sustainable without shifting expenses to taxpayers. This fee varies based on loan type, borrower history, and exemptions.
- Program Sustainability: The VA funding fee keeps the loan program self-funded, enabling Veterans to access benefits like no PMI and no down payment while reducing reliance on federal taxpayer contributions.
- IRRRL (Streamline Refinance): The funding fee for IRRRLs is only 0.5% of the loan amount, making it one of the most affordable refinance options available for eligible VA borrowers.
- Cash-Out Refinance: For VA Cash-Out refinances, the funding fee may be as high as 3.6%. Rates vary depending on service history and whether it is the borrower’s first or subsequent use.
- Exemptions: Veterans with qualifying service-connected disabilities, Purple Heart recipients, and eligible surviving spouses are fully exempt from the funding fee, eliminating one of the largest refinance costs completely.
Closing Costs
Similar to conventional mortgages, VA refinance loans include closing costs. These are one-time fees paid to complete the refinance process, though many Veterans choose to roll them into the new loan balance to avoid upfront out-of-pocket expenses.
- Origination Fees: Lenders may charge origination costs for processing the refinance. VA rules cap these charges, ensuring fairness and protecting Veterans from inflated loan processing expenses at closing.
- Title Insurance: Title insurance safeguards borrowers and lenders against disputes or claims on property ownership, providing long-term protection and ensuring that the refinance transaction remains legally valid and secure.
- Recording Fees: These charges cover the cost of officially recording the new loan with the county or local government, ensuring updated mortgage records and public documentation of the refinance agreement.
- Rolling Costs In: Borrowers can often include closing costs in the new loan balance, making refinancing more affordable by spreading expenses over time instead of paying them at settlement.
Appraisal Fee (If Applicable)
Appraisal requirements depend on the type of VA refinance chosen. While the IRRRL usually avoids appraisals, a Cash-Out refinance almost always requires one to confirm the property’s current market value and ensure accurate loan-to-value calculations.
- IRRRL (Streamline Refinance): In most cases, an appraisal is not required, reducing time and expense, and making the IRRRL one of the most convenient refinance options for qualified borrowers.
- Cash-Out Refinance: Requires a full appraisal to confirm the property’s worth and safeguard against over-borrowing. This ensures the loan amount reflects true equity and market conditions accurately.
- Typical Appraisal Fees: Appraisals usually cost between $300 and $600, though final pricing varies by property type, geographic location, and local market appraisal demand at the time of refinance.
Additional Costs to Consider
- Income Verification: Required for VA Cash-Out refinances to confirm repayment ability. Not required for IRRRLs, which rely on prior VA loan performance for streamlined qualification approval.
- Credit Report Fees: Lenders may charge modest fees for pulling updated credit reports to evaluate borrower eligibility, ensuring compliance with underwriting standards and protecting against default risks.
- Prepaid Expenses: Borrowers may need to cover prepaid items such as property taxes, homeowners insurance, or accrued interest during the transition period to the new VA refinance loan.
Comparison of Costs: IRRRL vs. Cash-Out Refinance
| Cost Component | IRRRL | Cash-Out Refinance |
|---|---|---|
| Funding Fee | 0.5% | Up to 3.6% |
| Appraisal Required? | No | Yes |
| Income Verification | No | Yes |
VA refinancing remains highly affordable due to capped lender fees, exemptions for qualifying disabled Veterans, and the option to roll costs into the new loan. Understanding these expenses helps borrowers decide if refinancing supports their financial goals.
The Refinancing Process
Refinancing a VA loan includes several steps, from initial preparation to finalizing the new loan. Here’s a step-by-step guide:
Step 1: Assess Your Current Loan Situation
Before moving forward with refinancing, carefully evaluate your existing VA loan and overall financial position. Reviewing your current balance, interest rate, home equity, and personal objectives helps determine whether refinancing aligns with your short-term needs and long-term financial goals.
- Current Interest Rate: Compare your current loan rate to prevailing VA refinance offers. If today’s rates are lower, refinancing could generate significant monthly savings and long-term interest reductions.
- Remaining Loan Balance: Assess your outstanding loan amount. Understanding how much you owe helps project new monthly payments and whether refinancing will truly improve your financial position.
- Home Equity: Identify how much equity you’ve built. While not required for IRRRL, equity plays a critical role in qualifying for VA Cash-Out refinancing options.
- Financial Goals: Clarify whether your objective is to reduce monthly payments, access cash, or switch loan terms. Clear goals ensure you choose the refinance option best suited to your needs.
Step 2: Shop for Lenders
Not all lenders are equally experienced in handling VA loans. Comparing multiple VA-approved lenders ensures you secure the most competitive interest rate, lowest fees, and highest quality service tailored specifically to your refinance needs.
- VA-Approved Lenders: Only lenders authorized by the Department of Veterans Affairs can issue VA refinances. Confirm approval before applying to ensure compliance and avoid processing delays.
- Reputation and Reviews: Research customer reviews, Better Business Bureau ratings, and community reputation. Reliable lenders with strong service records provide smoother closings and superior borrower experiences.
Step 3: Gather Required Documentation
While the VA IRRRL requires minimal paperwork, borrowers pursuing a Cash-Out refinance or switching from a conventional loan will need to provide additional documentation. Preparing these records early helps expedite the application and approval process.
- Proof of Income: Recent pay stubs, W-2 forms, or full tax returns may be requested to verify steady income and repayment ability, particularly for cash-out refinances.
- Bank Statements: Lenders typically review recent bank account statements to confirm assets, verify reserves, and ensure borrowers maintain sufficient liquidity during the refinance process.
- Mortgage Statement: A current mortgage statement shows your existing loan balance, payment history, and interest rate, providing lenders the baseline details needed for refinance approval.
- Certificate of Eligibility (COE): A valid COE confirms service history and benefit entitlement, ensuring the borrower qualifies for VA refinance options without disruption or additional delays.
- Debt and Asset Information: A summary of outstanding debts and current assets is often required for underwriter review, providing a full picture of borrower financial health.
Step 4: Apply for the Refinance
After selecting a lender and gathering the required documentation, the next step is formally applying for your VA refinance. Your lender will review your financial situation, employment status, and loan objectives before submitting your file into processing for official consideration and eligibility review.
- Employment Verification: Lenders require your current employment history and income details to confirm stable earnings, which helps determine your ability to handle the refinanced mortgage comfortably.
- Debt and Obligations: A full list of your active debts, including credit cards, car loans, or other obligations, is reviewed during application to evaluate your debt-to-income ratio accurately.
- Loan Purpose: For VA Cash-Out refinances, lenders will ask you to specify your desired loan amount and the purpose of funds, such as home improvements, debt repayment, or education expenses.
Step 5: Underwriting Process
Once your refinance application is submitted, the lender’s underwriting department will carefully evaluate your eligibility. This step includes verifying all documentation, reviewing credit history, and ensuring your refinance meets VA program standards and any additional lender-specific requirements before final loan approval.
- Financial Verification: Underwriters confirm income, assets, and debts, ensuring all financial details are accurate and compliant with both VA guidelines and the lender’s risk assessment standards.
- Property Appraisal: For cash-out refinances, a full appraisal is usually required to establish current market value and verify the requested loan amount aligns with the home’s worth.
- LTV Ratio Review: Loan-to-value ratios are evaluated for cash-out refinances. This step confirms that sufficient equity exists and ensures the loan remains within VA-mandated eligibility limits.
Step 6: Closing the Loan
After underwriting approval, you’ll move to closing, the final stage of your VA refinance. During this step, you’ll review loan documents, sign final paperwork, and either pay closing costs or roll them into the new loan balance depending on lender policies.
- Loan Documents: Borrowers review and sign closing disclosures, promissory notes, and any addendums, finalizing the legal terms of the refinance agreement with the lender.
- Closing Costs: Refinances include fees for origination, title insurance, and other services. These costs can often be financed into the loan balance, reducing or eliminating upfront out-of-pocket requirements.
- Loan Transition: The refinance pays off your existing VA or non-VA loan, and new monthly payments begin under the updated terms of the refinanced VA-backed mortgage.
Frequently Asked Questions About VA Loan Refinancing
What is VA loan refinancing?
VA loan refinancing allows eligible borrowers to replace their current mortgage with a new VA-backed loan. Options include the Streamline (IRRRL) to lower rates or payments, and the Cash-Out refinance to access equity for financial goals.
What is a VA Streamline Refinance (IRRRL)?
The Interest Rate Reduction Refinance Loan (IRRRL), or Streamline refinance, is a simplified option for current VA borrowers. It usually requires no appraisal, no income verification, and minimal costs while reducing interest rates or converting adjustable loans to fixed terms.
Can I get cash with a VA Streamline Refinance?
No. The IRRRL program is strictly for lowering interest rates or monthly payments. It does not allow borrowers to take cash out of their equity. For that, you must use the VA Cash-Out refinance option.
What is a VA Cash-Out Refinance?
A VA Cash-Out Refinance replaces your existing mortgage with a larger VA-backed loan and provides the difference as cash at closing. Funds can be used for improvements, debt repayment, education, emergencies, or other financial needs.
Can I refinance a non-VA loan into a VA loan?
Yes. Eligible borrowers can use a VA Cash-Out refinance to replace FHA, USDA, or conventional mortgages with a VA loan. This provides better terms, no PMI, and access to hallmark VA home loan benefits.
Do I need a new Certificate of Eligibility (COE) to refinance?
Yes. A valid Certificate of Eligibility (COE) is required for VA refinances. Most lenders can quickly retrieve your COE through the VA’s online portal, ensuring eligibility confirmation without delays during the refinance application process.
Is an appraisal required for VA refinancing?
For a VA Cash-Out refinance, an appraisal is required to confirm the property’s current market value. For the Streamline IRRRL refinance, appraisals are generally waived, making the process faster and less expensive for eligible borrowers.
What credit score do I need to refinance with a VA loan?
The VA sets no minimum score, but most lenders prefer at least a 620 FICO. Some lenders accept lower scores for IRRRLs, provided other loan factors like payment history or income remain strong.
What are the closing costs for a VA refinance?
VA refinance loans involve typical closing costs like origination, title, and escrow fees. However, many can be rolled into the loan balance. Streamline IRRRL refinances often feature very low fees and no required out-of-pocket costs.
Is the VA funding fee required for refinancing?
Yes. The VA funding fee applies to most refinances. IRRRLs carry a 0.5% fee, while Cash-Out refinances range from 2.15% to 3.3%. Disabled Veterans, Purple Heart recipients, and some surviving spouses are fully exempt from this charge.
Resources Used
- The VA IRRRL program overview
- The VA cash out refinance overview
- The VA Lender’s Handbook Chapter six, refinancing loans
- The VA IRRRL policy circular on seasoning and recoupment
- The VA funding fee and closing costs page
- How to request a VA home loan Certificate of Eligibility
- CFPB guidance on points and lender credits
- CFPB explanation of rate locks
- CFPB refinance decision checklist
