What Is a VA Home Loan Refinance?

Refinancing works by replacing your existing mortgage with a new loan, often at a lower interest rate, to reduce monthly payments, adjust the loan term, or tap into home equity cash funds. A VA home loan refinance is a mortgage option offered by the U.S. Department of Veterans Affairs (VA) designed to make refinancing more affordable with fewer fees and lower interest rates. The program is available to veterans, active-duty service members, and eligible military spouses.

• You can refinance your mortgage with a VA loan even if your current mortgage isn’t a VA loan.


• There is no set limit on the number of times you can refinance a mortgage / VA loan, though waiting periods typically apply (often 6 months).


• You can refinance a mortgage / VA loan with a different lender than the one who issued your original loan.

Refinancing can be a smart financial decision, especially if market rates have fallen or your financial situation has improved since you last closed your mortgage. Many homeowners opt to refinance to lower their monthly mortgage payments, consolidate debt, fund home improvements, or access cash to finance large purchases.

Benefits of Refinancing

One of the main reasons to refinance is to secure a lower interest rate, which can significantly reduce your monthly payments and save you thousands over the life of the loan. If you can now afford higher monthly payments, refinancing also allows you to shorten your loan term, helping you pay off the mortgage faster and reducing the total amount of interest you’ll pay over the life of your loan.

Refinancing allows you to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM), providing more stability and predictability in your monthly payments, especially in a fluctuating rate environment. Another common reason to refinance is the ability to tap into your home equity through a cash-out refinance. Many homeowners use their cash-out refi funds for home improvements, debt consolidation, or other major expenses.

VA Refinancing vs. Conventional Refinancing

The VA refinancing program typically offers lower upfront fees, lower rates, and no PMI, which can save eligible borrowers hundreds of dollars monthly compared to conventional refi loans. VA refinancing also offers a more streamlined (easier) process with fewer requirements than conventional refinancing, including no need for a full appraisal or credit check. Conventional refinances may offer more loan term flexibility but often come with higher fees and stricter credit requirements.

• Veterans’ refinance home loan options are not limited to VA loans.


• You can refinance a mortgage VA loan to a conventional loan.

Even though veterans who refinance their VA loans can generally secure better rates and more manageable terms, VA refinancing may not always be the best option for every financial situation. Some veterans may choose conventional refinancing if they have a strong credit profile (typically 740+) and low debt to income ratio (DTI). If this sounds like you, it could be smart to request quotes from conventional mortgage refi lenders as well as VA refi lenders. This can help you determine which lender is offering the best rates and loan amount based on your financial situation.

Pros and Cons of VA Refi Loans

Pros

+   Lower interest rates than conventional loans

+   No PMI required even with no down payment, which can cost hundreds of dollars each month (often 0.3% to 1.5% of the original loan amount per year)

+   More lenient credit score and debt-to-income (DTI) ratio requirements

Cons

-   Restricted to primary residences, whereas conventional mortgages can sometimes be used for second homes or investment properties

-   VA refi loans may provide less opportunity for high-value properties (about $725,000 to $1M+), particularly when down payments and equity are involved

-   One-time funding fee required (about 0.5% for a VA IRRRL and 1.25% to 3.3% for a VA Cash-Out Refi)

*Veterans with service-related disabilities may be exempt from the funding fee.

The Two VA Refinance Options

1. VA IRRRL (Interest Rate Reduction Refinance Loan)

The VA IRRRL, also called the VA Streamline Refinance, is designed for veterans who already have an existing VA home loan and want to refinance. The main purpose of the VA IRRRL is to secure a lower interest rate or switch from an adjustable-rate to a fixed-rate mortgage. This refinancing option cannot be used to take cash out from your home equity.

Requirements

• You must already have a VA loan


• There is no home equity requirement for this option, meaning you can refinance regardless of your current equity level


• Fewer documentation and no appraisal or credit check required, making the process quicker and easier than a conventional refinance

2. VA Cash-Out Refinance

The VA Cash-Out Refinance allows veterans to refinance their mortgage (whether it's a VA loan or not) and access their home equity by taking out cash. Cash-out loans are used for a variety of purposes, such as home improvements, debt consolidation, or covering medical expenses. It typically requires a full appraisal and more documentation, as you’re borrowing against your home’s value.

Requirements

• You can refinance an existing mortgage, VA or non-VA


• Lenders generally allow you to refinance up to 100% of your home value (but some lenders may only offer up to 90%)


• A full appraisal and additional documentation is required (including proof of income, proof of employment, bank statements, mortgage statements, and debt information)

VA Home Loan Refi Rates

VA loan refinance rates are often more affordable than conventional loan rates, largely because VA loans are backed by the U.S. Department of Veterans Affairs, which reduces the lender’s risk. Even with recent market fluctuations, VA home loan refi loans often remain more affordable than conventional refi loan options, providing veterans with better savings opportunities over the life of their loans.

Factors that Affect VA Refi Rates

• Credit Score: While VA loans are more forgiving of lower credit scores, those with strong credit histories will still secure the most favorable rates


• Loan Amount and Term: Shorter-term loans (like 15 years) typically have lower interest rates than longer-term loans (like 30 years)


• Fixed-Rate vs. Adjustable-Rate: Fixed-rate loans keep the interest rate steady for the life of the loan, while adjustable-rate loans start with a lower initial rate which can adjust based on market conditions


• Current Market Conditions: VA loan rates generally follow broader mortgage market trends, which are influenced by factors like inflation, Federal Reserve policies, and overall economic health


• Lender Policies: Different lenders may offer slightly different VA loan rates based on their own policies, meaning it’s a good idea to shop around for the best deal


• Home Equity: Higher home equity makes you a lower-risk borrower, potentially securing you a better interest rate

Understanding the factors that affect your mortgage rate and how they work together could help you reduce your monthly payments and save thousands of dollars in interest over the life of your mortgage loan.

VA Refi Rates Near You

Regions with Higher and Lower VA Loan Rates

In general, VA loan rates tend to be a bit higher in areas with booming housing markets. This includes major cities or high-demand regions along the coasts. In these areas, home prices are higher, and there’s often more competition for loans, which can push rates up slightly.

On the other hand, in less competitive or more rural areas, VA loan rates tend to be lower. These areas, such as parts of the Midwest and South, often see slower housing growth, resulting in more favorable rates for borrowers.

Why VA Loan Rates Vary by Location

Even though VA loans are backed by the government, regional differences still play a role in the rates you’ll qualify for. Some reasons why VA loan rates might change based on location include:

• Cost of Living: In places where the cost of living is higher, like large cities or coastal areas, VA loan rates might be slightly higher due to higher demand


• Housing Demand: In growing or competitive real estate markets, such as urban centers or popular suburban areas, more people are looking to buy homes, which can result in increased rates


• State Regulations: Some states may have laws or programs that affect loan rates and can influence the overall cost of borrowing in certain regions

Finding the Best VA Refi Rate for You

While your location is a factor, personal details like your credit score, loan term, and the lender you choose will also affect the VA refi rate you're offered. It’s a good idea to compare offers from multiple lenders to find the best deal in your area. Many lenders are familiar with VA loans and can help you navigate the process, offering insights specific to your local market.

VA Program Eligibility Requirements

To qualify for the VA loan program, applicants must meet specific criteria set by the Department of Veterans Affairs. These criteria are designed to ensure that VA home loan refinance loans are accessible to those who have served while maintaining financial stability for the borrower.

Service Requirements

• Served at least 90 consecutive days of active duty during wartime


• Served at least 181 days of active duty during peacetime


• Completed more than 6 years of service in the National Guard or Reserves


• Be the spouse of a military member who lost their life in the line of duty or as a result of a service-related disability

Financial Requirements

• You must demonstrate to lenders that you have sufficient income to afford the property you wish to purchase


• Typically, a DTI of 40% or less is preferred, though lenders may offer flexibility based on individual circumstances


• A credit score of 620 is generally required, though lenders may go as low as 500

Where to Get VA Refi Loans?

You can get a VA home loan refinance loan through various lenders, including banks, credit unions, and online mortgage companies that cater to veterans. It's a good idea to shop around and compare rates from different lenders. Many institutions offer veterans refinance home loan options, including VA home loan streamline refinance (IRRRL) and VA cash-out refinance programs.

The lenders featured on our site are state and/or federally licensed and approved to write VA loans.

How to Apply for a VA Refi Loan

To apply for VA home loans you’ll need your Certificate of Eligibility (COE) to show lenders that you qualify for VA benefits. Most lenders will handle the COE application for you. If they don’t, you can apply yourself through VA.gov or by mail. Most receive their COE within a few minutes when applying online, but, if it’s not automatically linked to your profile, the process can take up to 30 days to complete manually.

Once you have your COE, you’ll submit your loan application. If you're applying for a VA Cash-Out Refinance, you’ll need a home appraisal and financial documents (pay stubs, tax returns, bank statements, and your current mortgage statement). For a VA IRRRL (Streamline Refinance), an appraisal and extra documentation is usually not needed, expediting the process. Once your application is approved, you'll proceed to closing, where final documents are signed.

Expected Timeline

1. COE: Immediate to 30 days, depending on whether it's automatic or manual


2. Prequalification: 2-5 days


3. Loan Application and Processing: Typically less than 1 week for VA streamline refinance (IRRRL) and 2 to 3 weeks for a VA cash-out refinance


4. Closing: Usually 30-60 days in total from the start of the application