VA Refinance 2026

IRRRL, cash-out, and the rules that govern both

VA Refinance Options in 2026: IRRRL and Cash-Out

Written by: Matt SchwartzNMLS#151017Written by: Matt Schwartz (NMLS 151017)

Reviewed by: Kenneth Schwartz, Loan OfficerNMLS#1001095Reviewed: Kenneth Schwartz (NMLS 1001095)

Updated on September 24, 2026

Primary sources:
VA.gov IRRRL

VA.gov Cash-Out

VA.gov Funding Fee

The VA offers two refinance paths. An IRRRL replaces an existing VA loan at a lower rate with no appraisal or credit underwriting package required by the VA. A cash-out refinance taps equity or replaces a non-VA loan through full underwriting. Both carry a funding fee unless the borrower is exempt and must deliver a net tangible benefit.

Next step:
Compare VA Refinance Offers

IRRRL

Replaces an existing VA loan. The new rate must be at least 50 basis points lower for fixed-to-fixed or 200 basis points lower for fixed-to-ARM; an ARM-to-fixed may increase. [VA rule] · 38 USC 3709(b); Ch. 6 Topic 1
No VA-required appraisal or credit package. The VA does not require a standard appraisal or credit underwriting package, though a lender may add its own valuation or review. [VA rule] · Ch. 6 Topic 1
Funding fee is 0.5 percent. This applies to all borrowers who are not exempt due to a service-connected disability or other qualifying status. [VA.gov] · Funding fee page
Prior occupancy, not current. The borrower certifies that he or she previously occupied the property as a home. [VA rule] · Ch. 6 Topic 1

Cash-Out

Replaces any recorded lien. A cash-out refinance can pay off a VA, conventional, FHA, or USDA loan and may provide cash to the borrower. [VA rule] · Ch. 6 Topic 3
Full underwriting required. The VA requires full credit underwriting, a VA appraisal, and a current Certificate of Eligibility. [VA rule] · Ch. 6 Topic 3
Maximum loan is 100 percent of reasonable value. The new loan including the financed funding fee must not exceed 100 percent of the VA reasonable value. [VA rule] · 38 CFR 36.4306(a)
Current occupancy required. The borrower must live in the home being refinanced. [VA.gov] · Cash-out page

Seasoning and Rate Tests

IRRRL seasoning. At least 210 days since the first payment due date and at least six consecutive monthly payments made. [VA rule] · 38 USC 3709(c)
Cash-out seasoning (VA-to-VA only). Type I requires 210 days and six consecutive payments; Type II requires 210 days and six payments that need not be consecutive. [VA rule] · Ch. 6 Topic 3
Non-VA to VA has no VA seasoning. The VA does not impose a waiting period when the loan being refinanced is not VA-guaranteed. [VA rule] · Ch. 6 Topic 3
Net tangible benefit. Every VA refinance must satisfy at least one of eight benefit tests defined in federal regulation. [VA rule] · 38 CFR 36.4306(a)(3)

Entitlement and Occupancy

IRRRL does not consume additional entitlement. The same entitlement tied to the existing VA loan carries over to the new loan. [VA rule] · Ch. 6 Topic 1
Cash-out VA-to-VA can restore entitlement. The entitlement charged to the old VA loan may be restored for the refinancing loan on the same property. [VA rule] · Ch. 6 Topic 3
IRRRL occupancy is prior. The borrower certifies prior occupancy, not current residence, making the IRRRL available to Veterans who have PCS'd or converted the home to a rental. [VA rule] · Ch. 6 Topic 1
Cash-out occupancy is current. The borrower must intend to personally occupy the property as a home. [VA.gov] · Cash-out page

Asked First

The Bottom Line Up Front

An IRRRL is the lighter path and a cash-out is the heavier one, and VA rules draw a sharp line between them.

An IRRRL must refinance an existing VA loan, carries a 0.5 percent funding fee, and generally requires no appraisal or credit underwriting package from the VA. A cash-out refinance can replace any recorded lien, carries a 2.15 percent funding fee on first use or 3.3 percent on subsequent use, and requires full underwriting plus a VA appraisal. Both paths must pass a net tangible benefit test, and both require the new loan to be the first lien on the property with any second lien holder agreeing to subordinate.

IRRRL vs. Cash-Out: Requirements at a Glance

VA Refinance Comparison
Requirement	IRRRL	Cash-Out
Existing loan must be VA	Yes	No, any recorded lien
Certificate of Eligibility	Not required if existing VA loan is on file	Required
Credit underwriting package	Not required by the VA (lender may add)	Full underwriting required
Occupancy	Prior occupancy certified	Current occupancy required
Appraisal	Not required by the VA (lender may add)	VA appraisal required
Seasoning	210 days + 6 consecutive payments	VA-to-VA: 210 days + payments; non-VA to VA: none
Recoupment	36 months	Type I VA-to-VA: 36 months; Type II: not required
Cash to borrower	No equity cash; EEM up to $6,000	Yes, within 100% of reasonable value

IRRRL: The Streamline Refinance

The 210-day and six-payment test. The first payment due date on the existing VA loan must be at least 210 days before the note date of the new loan, and the borrower must have made at least six consecutive monthly payments. Each payment must be made in full, in the month it is due, across six successive months.
Rate tests. Fixed-to-fixed requires at least a 50 basis point reduction; fixed-to-ARM requires at least 200 basis points. An ARM-to-fixed may increase. The principal and interest payment must also decrease unless the IRRRL is refinancing an ARM, shortening the term, or including energy efficiency improvements.
Recoupment. All fees and closing costs, whether financed or paid in cash, must be recouped within 36 months from the reduction in principal and interest. The VA funding fee, escrow, and prepaid expenses may be excluded from the recoupment calculation. If the new PI is equal to or higher than the current PI, the lender may not charge the borrower loan fees or closing costs other than taxes, escrow, and the funding fee. If the PI increases by 20 percent or more, the lender must underwrite the borrower for the new payment.

IRRRL rate tests

Existing loan	New loan	Rate rule
Fixed	Fixed	New rate must be at least 50 basis points lower
Fixed	ARM	New rate must be at least 200 basis points lower
ARM	Fixed	Rate may increase; payment stability is the benefit

30-year to 15-year. When the IRRRL shortens the term, the principal and interest payment may increase. The fixed-to-fixed 50 basis point test still applies, and the lender must disclose the recoupment timeline.
Occupancy and PCS. The borrower certifies prior occupancy, not current residence. This makes the IRRRL available to Veterans who have received permanent change of station orders, converted the home to a rental, or moved for any reason, as long as the original VA loan was for a primary residence when it closed.
Second liens and subordination. The IRRRL must replace the existing VA loan as the first lien. Any second lienholder must agree to subordinate. The borrower cannot pay off other liens from IRRRL proceeds.
What the VA does not require and what a lender may add. The VA requires no appraisal, no credit report, and no income documentation for a standard IRRRL. A lender, however, may require a credit report, an appraisal, or income verification to satisfy its own lending standards, and any reasonable cost for these services may be charged to the borrower. [Common lender practice]
Delinquent IRRRLs. If the existing VA loan is 30 days or more past due at the time of closing, the IRRRL must be submitted for VA prior approval. For more on how late payments affect VA loans, see that guide. The lender must demonstrate that the cause of the delinquency has been resolved and that the borrower is willing and able to make the proposed payments.
Energy efficiency improvements. An IRRRL cannot be used for an equity cash-out. The one exception is reimbursement up to $6,000 for energy efficiency improvements completed within 90 days before the loan closing date. Minor cash adjustments from computational errors, payoff changes, or escrow refunds are also permitted.

Cash-Out Refinance: Type I and Type II

Not every VA cash-out refinance takes cash out

Type I. The new loan amount including the VA funding fee does not exceed the payoff amount of the loan being refinanced. No equity is removed. Type I carries rate tests and a 36-month fee recoupment requirement when the loan being refinanced is a VA loan.
Type II. The new loan amount including the VA funding fee exceeds the payoff amount. The borrower may remove equity from the property. Type II has no VA-imposed rate test or fee recoupment rule, but must satisfy the net tangible benefit test.

Seasoning

Refinance path	Seasoning requirement
IRRRL	210 days from first payment due date + 6 consecutive payments
VA-to-VA Type I cash-out	210 days from first payment due date + 6 consecutive payments
VA-to-VA Type II cash-out	210 days from date first payment was made + 6 payments (need not be consecutive)
Non-VA to VA cash-out	No VA seasoning requirement

The eight net tangible benefit items

Every VA cash-out refinance must satisfy at least one of the following:

Eliminates monthly mortgage insurance or guaranty insurance.
Shorter loan term than the loan being refinanced.
Lower interest rate than the loan being refinanced.
Lower monthly payment than the loan being refinanced.
Higher monthly residual income as a result of the refinance.
Refinances an interim construction loan.
New loan LTV is 90 percent or less of the reasonable value.
Converts an adjustable-rate mortgage to a fixed rate.

100 percent of reasonable value

The new loan cannot exceed 100 percent of the VA reasonable value of the property. The financed funding fee is included in that ceiling: any portion that would push the loan above 100 percent of reasonable value must be paid in cash at closing.

Cash to the borrower is not the same as 100 percent of the home's value. It is what remains after the payoff amount, other liens being refinanced, closing costs, and the funding fee are subtracted from the maximum loan amount. A lender may also set its own LTV cap below the VA maximum.

Type I rate tests and recoupment

Fixed to fixed. The new interest rate must be at least 50 basis points lower than the existing VA loan.
Fixed to ARM. The new interest rate must be at least 200 basis points lower than the existing VA loan.
ARM to fixed. There is no requirement to reduce the interest rate. The rate may increase.
Recoupment. The fee recoupment period for allowable fees, expenses, and closing costs must not exceed 36 months. The VA funding fee, escrow, prepaid expenses such as insurance, taxes, special assessments, and HOA fees may be excluded from the recoupment calculation.
Same-or-higher PI rule. If the monthly principal and interest payment is not reduced as a result of the refinance, the lender may not charge the borrower loan fees, closing costs, or expenses other than taxes, amounts held in escrow, and the VA funding fee.

Entitlement on a Refinance

IRRRL. No additional charge is made to the Veteran's entitlement. The entitlement used on the existing VA loan carries over to the new loan.
VA-to-VA cash-out. The entitlement charged to the old VA loan may be restored for purposes of obtaining the refinancing loan on the same property.
Non-VA to VA. The borrower must have available entitlement. A cash-out refinance of a conventional or FHA loan uses the Veteran's entitlement to guarantee the new loan.
VA to conventional (one-time restoration). Refinancing out of a VA loan into a conventional mortgage pays off the VA loan. The Veteran may apply for one-time restoration of the entitlement used on the prior loan even without disposing of the property, and this option is available once. Any future restoration after a one-time restoration requires disposal of all properties obtained with a VA loan.

VA Funding Fee on Refinances

Loan type	First use	Subsequent use
IRRRL	0.5% (all uses)
Cash-out	2.15%	3.3%

The funding fee may be financed into the loan amount. For more on fee tiers and exemptions, see VA funding fee. The following borrowers are exempt from paying the funding fee:

Receiving VA compensation for a service-connected disability.
Eligible for VA compensation but receiving retirement or active-duty pay instead.
Surviving spouse receiving Dependency and Indemnity Compensation.
Pre-discharge rating. A service member with a proposed or memorandum rating before the loan closing date.
Purple Heart recipient. An active-duty member who provides evidence of a Purple Heart on or before the closing date.

VA Cash-Out vs. HELOC vs. Home Equity Loan vs. Non-VA Refinance

If you need to...	Consider	Why
Access equity once for a defined purpose	VA cash-out or home equity loan	Both deliver a lump sum; the VA cash-out replaces the first lien, while a home equity loan adds a second lien with a fixed rate.
Draw equity over time as needed	HELOC	An open-end revolving line of credit against home equity, with a draw period and a repayment period, and a rate that is typically variable. The VA does not offer HELOCs.
Lower rate with minimal paperwork	IRRRL (VA loan holders only)	No appraisal, no credit package required by the VA, 0.5% funding fee.
Free up VA entitlement for a new purchase	Refinance to conventional	Pays off the VA loan; one-time entitlement restoration may be available.
Consolidate high-rate debt	VA cash-out (but weigh the cost)	Trading unsecured debt for secured debt against the home. See the caution below.

Debt consolidation caution

A VA cash-out refinance can pay off credit cards, auto loans, or other debts by folding them into a new first-lien mortgage. The monthly payment may drop because the new loan spreads the balance over a longer term at a lower rate. But unsecured debt becomes secured by the home, and the total interest paid over the life of the loan may increase. Run the numbers with the tool above before committing.

Lower Payment Is Not the Same as Lower Cost

A refinance can reduce the monthly payment and still cost more over the life of the loan. Extending a remaining 20-year balance to a new 30-year term lowers the payment but adds 10 years of interest. The recoupment calculation measures how long it takes the monthly savings to cover the closing costs, but it does not measure total interest paid. Ask for a side-by-side comparison of the remaining cost on the current loan against the total cost of the new loan.

Rates, Points, and Lender Credits

A discount point equals one percent of the loan amount, paid up front in exchange for a lower interest rate. A lender credit works in reverse: the borrower accepts a higher rate and the lender offsets some closing costs. A rate lock means the offered interest rate will not change between the offer and closing, as long as the borrower closes within the specified time frame and the application does not change.

VA rules cap the lender's flat origination charge at one percent of the loan amount. For a full breakdown of what you can expect to pay, see VA closing costs. On an IRRRL, up to two discount points may be included in the loan amount.

Behind on Payments

If you are behind on your VA mortgage or facing financial hardship, the VA offers several options before foreclosure, including special forbearance, repayment plans, loan modifications (30-year and 40-year), and the VA Partial Claim Program. Contact the VA at 877-827-3702, select option 6, Monday through Friday, 8 a.m. to 6 p.m. ET. For more detail, see VA foreclosure avoidance programs.

Refinance Solicitation: Red Flags and What to Ask

Red flag	What to ask instead
Caller claims to represent the VA about your mortgage	The VA does not contact Veterans to offer refinancing. Verify any offer with your current servicer.
Mailer with official-looking VA branding that is not from the VA	Check the return address and confirm the lender is VA-approved before responding.
Pressure to refinance within days of closing the current loan	Seasoning rules require at least 210 days and six payments. A legitimate lender will confirm you meet the requirement.
Offer to skip payments as part of the refinance	Skipped payments accrue interest and may affect credit. Ask for the total cost including any deferred amounts.
Closing costs rolled in without a clear recoupment timeline	Ask for the recoupment calculation in writing. If costs exceed 36 months of savings on a Type I or IRRRL, scrutinize the benefit.

The VA Refinance Process

Identify the goal. Decide whether you need a lower rate (IRRRL), equity access (cash-out), or a conversion from a non-VA loan (cash-out).
Confirm seasoning. Check the first payment due date and payment count on the existing loan.
Obtain your COE. For a cash-out refinance, request a current Certificate of Eligibility. For an IRRRL, a COE is not required if the existing VA loan is on file.
Compare lenders. Get quotes from multiple VA-approved lenders. Compare the interest rate, points, lender credits, and the recoupment timeline.
Review the net tangible benefit. The lender must show how the refinance benefits you. Review the comparison disclosure and the recoupment calculation.
Complete underwriting. For an IRRRL, this may be minimal. For a cash-out, expect full documentation including income, assets, and a VA appraisal. The appraisal fee is set by the VA fee schedule, which varies by state and county.
Close the loan. Review and sign closing disclosures. The new loan pays off the existing mortgage, and new payments begin under the updated terms.

Frequently Asked Questions

Can an IRRRL pay off my HELOC or second mortgage?

No. An IRRRL can only refinance the existing VA loan. The borrower cannot pay off other liens from IRRRL proceeds. Any second lienholder must agree to subordinate to the new first lien. If you need to consolidate a HELOC or second mortgage, a VA cash-out refinance is the appropriate path.

What is the difference between Type I and Type II cash-out?

Type I: the new loan amount including the funding fee does not exceed the payoff of the loan being refinanced. No equity is removed. Type II: the new loan exceeds the payoff, and the borrower may take cash. Type I VA-to-VA has additional rate tests and a 36-month recoupment requirement that Type II does not.

Do I need an appraisal for an IRRRL?

The VA does not require an appraisal for a standard IRRRL. A lender may require one to satisfy its own lending standards, and any reasonable appraisal cost may be charged to the borrower. For a cash-out refinance, a VA appraisal is always required.

Will refinancing affect my VA entitlement?

An IRRRL does not consume additional entitlement; the same entitlement carries over from the existing VA loan. A VA-to-VA cash-out refinance may restore entitlement charged to the old loan for the new loan on the same property. A cash-out from a non-VA loan uses available entitlement. Confirm available entitlement early by reviewing your COE.

Can I roll closing costs into a VA refinance?

On an IRRRL, allowable fees and charges, including the funding fee and up to two discount points, may be included in the loan amount. On a cash-out refinance, closing costs may be paid from loan proceeds, but the total loan including the funding fee cannot exceed 100 percent of reasonable value.

Does refinancing reset my loan term?

It can. Refinancing into a new 30-year term lowers the payment but may increase total interest. The IRRRL term cannot exceed the original term plus 10 years or 30 years and 32 days, whichever is less. A cash-out term cannot exceed 30 years and 32 days. Ask for a side-by-side comparison before committing.

Is there a VA minimum credit score for refinancing?

The VA does not set a minimum credit score for VA-guaranteed loans. Individual lenders set their own credit overlays, which vary. [Common lender practice] For more on credit requirements, see VA loan credit score requirements.

Does a VA refinance carry mortgage insurance?

VA-guaranteed loans do not require monthly private mortgage insurance or monthly VA mortgage insurance, regardless of the loan-to-value ratio. The VA funding fee is a one-time charge, not a recurring monthly premium. Other loan programs such as FHA or conventional may carry monthly mortgage insurance depending on the loan structure.

What is the VA appraisal fee for a cash-out refinance?

The VA sets appraisal fees by state and county. The fee schedule is updated periodically; the current schedule is effective May 1, 2026. Fees vary, and the schedule is published on the VA benefits site. An IRRRL does not require a VA appraisal.

How We Researched This Page

Every fact traces to a primary source fetched and quoted during research: VA Pamphlet 26-7 Chapters 2, 6, and 8 via KnowVA (last updated July 9, 2026); 38 CFR 36.4306 and 36.4307 (govinfo 2025 edition); 38 USC 3709 (uscode.house.gov); the VA.gov program pages for IRRRL, cash-out refinancing, and funding fee; the VA trouble making payments page; the VA appraisal fee schedule (effective May 1, 2026); and CFPB guidance on points, lender credits, and rate locks. Type I and Type II definitions, fee recoupment rules, and rate-reduction minimums are cited to statute and regulation. Lender overlay ranges reflect published policies across VA-specialty lenders and are labeled as such.

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