VA Loan Refinancing Information
VA Loan Refinancing Information
Your VA home loan benefit can continue working for you long after you purchase your home. Refinancing can be used to lower your payment, access equity, shorten your loan term, change your loan structure, or accomplish other financial goals.
Veterans refinance for many different reasons.
The most common goal is usually to lower the interest rate, decrease the mortgage payment, and save money each month.
Others want to access home equity, shorten the number of years remaining on the mortgage, move into a more stable loan, add a spouse to the new mortgage, refinance into VA financing, consolidate debt, or restructure their mortgage around new financial goals.
Start by telling us what you want to accomplish. We can help determine which VA refinance structure may fit that goal.
If you already have a VA-backed mortgage and an eligible lower rate is available, the VA Interest Rate Reduction Refinance Loan may provide a streamlined way to refinance.
A lower interest rate can reduce the principal-and-interest portion of your monthly mortgage payment and potentially create meaningful monthly savings.
We can compare your existing interest rate, mortgage payment, loan balance, remaining term, closing costs, and available VA refinance options to determine whether refinancing provides enough benefit to make sense.
As your mortgage balance decreases or your property increases in value, you may build equity in your home.
A VA Cash-Out refinance may allow an eligible homeowner to replace the existing mortgage with a new VA-backed loan and receive part of the available equity as cash.
VA rules can permit qualifying Cash-Out refinancing up to 100% of the VA-appraised reasonable value in qualifying transactions. Individual lenders may establish lower loan-to-value limits or additional credit, income, property, and underwriting requirements.
Why Do Veterans Take Cash From Their Home Equity?
Pay Off Higher-Cost Debt
Available equity may be used to pay off credit cards, installment loans, or other obligations.
This may reduce monthly obligations in some situations, but converting unsecured debt into mortgage debt should be evaluated carefully because the debt becomes secured by your home.
Home Improvements
Cash-Out funds may be used for remodeling, repairs, renovations, accessibility improvements, or other improvements to the home.
Education
VA identifies education expenses as one potential use of funds received through a Cash-Out refinance.
Other Financial Needs
Available equity may also provide funds for other financial needs, subject to the borrower's circumstances and applicable loan requirements.
Refinancing does not have to be about lowering your monthly payment.
Some Veterans intentionally refinance into a shorter mortgage term so they can pay their home off sooner.
For example, a homeowner may choose to move from a longer remaining mortgage term into a 20-year or 15-year loan when the available loan structure and qualification requirements make sense.
A shorter term may help you:
- Pay your mortgage off years sooner
- Build home equity faster
- Reduce the number of years you are paying mortgage interest
- Potentially reduce total interest paid over the life of the loan
The tradeoff is important: shortening the loan term can increase the required monthly payment even when the new interest rate is lower.
Shortening an IRRRL Term Can Increase the Payment
VA specifically recognizes IRRRL transactions that shorten a mortgage term, including examples involving a move from a 30-year loan to a 15-year loan.
If the new monthly principal, interest, taxes, and insurance payment increases by 20% or more, VA requires additional underwriting to determine that the Veteran can support the higher payment.
We can compare the increased monthly payment with the faster payoff and potential long-term interest savings so you can see whether shortening the term makes sense for you.
A Veteran with an eligible VA adjustable-rate mortgage may use an IRRRL to move into a fixed-rate mortgage.
In this situation, the financial benefit may be greater payment stability rather than simply obtaining the lowest possible initial interest rate.
A fixed-rate mortgage eliminates future contractual interest-rate adjustments and can provide more predictable principal-and-interest payments.
Adding a Spouse or Changing Who Is on the Mortgage
Some Veterans refinance because they want their spouse added to the actual mortgage obligation.
A spouse may sometimes be added to ownership of the property through the deed without refinancing the mortgage. But being named as an owner on the deed does not automatically make that spouse a borrower who is legally obligated to repay the existing mortgage.
Some homeowners therefore choose to refinance because they want both spouses obligated on the new mortgage.
VA rules specifically recognize certain IRRRL transactions where the parties obligated on the loan change. For example, an unmarried Veteran who originally obtained the VA loan may potentially refinance into a new IRRRL with the Veteran and a new spouse both obligated on the new mortgage.
VA guidance also recognizes certain other changes involving divorce, remarriage, death of a Veteran, or substitution of entitlement. The exact rules depend on who was obligated on the old VA loan and who will be obligated on the new loan.
The refinance must still independently qualify under the applicable VA requirements.
For an IRRRL, that includes applicable net tangible benefit, rate, payment, seasoning, recoupment, and other VA requirements.
In other words, wanting your spouse on the mortgage may be one reason you are interested in refinancing, but the new loan still needs to satisfy the requirements that allow the VA refinance itself.
VA refinance rules are designed to help prevent Veterans from being placed into refinances that provide too little benefit in relation to the costs or changes being made to the loan.
Depending on the refinance, the benefit may involve a lower qualifying interest rate, lower payment, a permitted ARM-to-fixed conversion, shortening the loan term, or another transaction that satisfies the applicable VA refinance standards.
IRRRLs are also subject to applicable seasoning, fee recoupment, discount-point, and net tangible benefit requirements.
We can review the proposed new loan against your current mortgage so you understand exactly what you are gaining and what the refinance will cost.
A VA Cash-Out refinance can potentially be used to replace an eligible non-VA mortgage with a VA-backed mortgage.
This can include certain conventional, FHA, or other existing mortgage financing.
This is different from the VA Streamline IRRRL, which is specifically a VA-to-VA refinance.
If you currently have a non-VA mortgage, we can compare that loan with available VA financing to determine whether changing programs provides a meaningful financial benefit.
The Two Main VA Refinance Programs
There are many reasons a Veteran may choose to refinance. Those goals are generally accomplished through one of the two primary VA refinance programs.
The VA Interest Rate Reduction Refinance Loan is used to refinance an existing VA-backed mortgage.
Possible goals include:- Lowering an eligible interest rate
- Reducing an eligible monthly payment
- Shortening the mortgage term
- Paying the home off sooner
- Moving from an ARM into a fixed-rate mortgage
- Adding a spouse or making another allowable change in obligors when VA requirements permit
An IRRRL generally involves a more streamlined process than a traditional refinance, but it cannot be used to take cash from the home's equity.
The VA Cash-Out program provides broader refinancing flexibility and generally requires full qualification and a VA appraisal.
Possible goals include:- Accessing available home equity
- Consolidating other debts
- Making home improvements
- Funding education
- Restructuring mortgage financing
- Changing the loan term
- Refinancing an eligible non-VA loan into VA financing
VA Streamline vs. VA Cash-Out Refinance
| Feature | VA Streamline / IRRRL | VA Cash-Out |
|---|---|---|
| Existing mortgage | Must already be VA-backed | May be an eligible VA or non-VA mortgage |
| Lower rate/payment | Common purpose | May also be possible depending on transaction |
| Shorten loan term | Potentially yes | Potentially yes |
| ARM to fixed | Yes, when eligible | May also be structured as applicable |
| Add spouse / change obligors | Certain changes may be permitted under VA IRRRL rules | Borrower structure subject to applicable VA and lender rules |
| Receive cash from equity | No | Potentially yes |
| Refinance non-VA mortgage | No | Potentially yes |
| VA appraisal | Generally not required by VA | Required |
| Credit and income underwriting | Streamlined under standard VA rules, subject to applicable exceptions and lender requirements | Full credit and income qualification generally required |
What If the Borrowers Change on an IRRRL?
VA's lender guidance specifically addresses IRRRLs where the people obligated on the old loan and new loan are different.
VA does not automatically require full credit and income re-underwriting solely because there has been an allowable change in obligors. However, the lender may review additional information based on the circumstances, and investor or lender requirements may apply.
Because borrower-change scenarios can differ substantially, we will review the specific situation before determining how the refinance should be structured.
Start With Your Goal - Not the Loan Name
You Do Not Need to Know Which Refinance Program You Need
Tell us what you are trying to accomplish.
Do you want a lower monthly payment? A lower rate? Cash from your equity? A shorter mortgage? To pay the house off sooner? To consolidate debt? To move from an adjustable rate into a fixed rate? To add your spouse to the mortgage?
We can review your current mortgage and help identify which available VA refinance structure may accomplish that goal.
VA Refinance Eligibility
The eligibility and qualification requirements depend on which refinance program is being used.
A VA Cash-Out refinance generally requires applicable VA eligibility, qualifying entitlement, satisfactory credit and income, lender approval, a VA appraisal, occupancy requirements, and other applicable program requirements.
An IRRRL has different qualification rules because it can only refinance an existing VA-backed mortgage.
We Can Help Verify the VA Information Needed
You do not need to determine VA entitlement and eligibility requirements by yourself.
With your authorization, VA Help Center can help obtain the applicable VA eligibility information and Certificate of Eligibility when required.
Detailed military service requirements are covered separately on our VA Loan Eligibility page.
Does the New Loan Actually Improve Your Situation?
Refinancing should be evaluated based on what changes after the new loan closes.
Monthly Payment
Compare your existing mortgage payment with the expected payment on the proposed refinance.
Interest Rate
Determine whether the new rate provides meaningful savings or supports another permitted financial goal.
Loan Term
A longer term may lower the required payment. A shorter term may accelerate payoff. Both can materially affect total interest.
New Loan Balance
Consider the effect of closing costs, any financed VA funding fee, cash received, and other allowable amounts included in the new loan.
Closing Costs
Compare fees and discount points with the expected monthly and long-term financial benefit.
Your Actual Goal
The right refinance is the one that accomplishes what you need while satisfying the applicable VA and lender requirements.
How We Review Your VA Refinance
Our goal is not simply to replace your existing mortgage.
If the available options do not provide enough benefit to justify the costs or changes to your loan, keeping your current mortgage may be the better decision.
We want to show you the actual numbers so you can understand whether the refinance accomplishes what you want it to accomplish.
Common VA Refinance Questions
What is the most common reason Veterans refinance?
A common reason is to reduce an eligible interest rate and monthly mortgage payment to create monthly savings. Whether the refinance makes financial sense depends on the new terms, costs, remaining term, loan balance, and applicable VA requirements.
Can I refinance simply to pay my home off faster?
Potentially yes. An eligible refinance may be structured with a shorter loan term. VA specifically recognizes IRRRL transactions that shorten a longer mortgage term. The tradeoff can be a higher required monthly payment.
Can an IRRRL shorten my loan from 30 years to 15 years?
Potentially yes. VA guidance specifically discusses IRRRLs that reduce a longer mortgage term to a shorter term. A shorter term may accelerate equity growth and reduce total interest but can substantially increase the required monthly payment.
Can I add my spouse to my VA loan when I refinance?
Certain VA refinance scenarios allow a spouse to be added to the new mortgage. VA specifically identifies an unmarried Veteran refinancing into a new IRRRL with the Veteran and a new spouse as a permissible borrower-change scenario. The refinance must still satisfy the applicable VA requirements.
Do I have to refinance just to add my spouse to the deed?
Not necessarily. Ownership of the property and responsibility for the mortgage are separate issues. A spouse may sometimes be added to the deed without refinancing the mortgage, depending on the circumstances and applicable property-title requirements. Adding someone to the deed does not by itself make that person obligated to repay the existing mortgage.
Does adding my spouse automatically create the benefit required for an IRRRL?
No. The desire to add a spouse may be a reason for considering the refinance, but the IRRRL must still independently satisfy applicable VA refinance requirements, including applicable net tangible benefit, seasoning, recoupment, rate, payment, and other requirements.
Does adding a spouse automatically require full IRRRL underwriting?
VA guidance does not automatically require full credit and income re-underwriting solely because there is an allowable change in obligors. However, additional lender or investor requirements can apply, and the lender must review the individual transaction.
Can I take cash from my home equity?
Potentially. A VA Cash-Out refinance may allow an eligible homeowner to access available equity subject to VA appraisal, borrower qualification, lender requirements, liens, loan-to-value limits, and other applicable requirements.
What can Cash-Out funds be used for?
Common uses include paying off debt, home improvements, education, and other financial needs. Consider both the immediate monthly effect and the long-term cost of moving other obligations into mortgage debt.
Do I need to already have a VA loan?
You must already have a VA-backed mortgage to use an IRRRL. An eligible VA Cash-Out refinance may potentially refinance either a VA mortgage or certain non-VA mortgages into VA financing.
Can I refinance an adjustable-rate VA loan into a fixed rate?
Yes, when applicable requirements are satisfied. Moving from an eligible VA adjustable-rate mortgage into a fixed-rate mortgage is one recognized use of an IRRRL and can provide greater payment stability.
Does Cash-Out refinancing require an appraisal?
Yes. VA Cash-Out refinancing generally requires a VA appraisal to establish the property's reasonable value.
Does an IRRRL require an appraisal?
A standard IRRRL generally does not require a new VA appraisal, although applicable exceptions, lender requirements, or transaction circumstances can affect the documentation required.
Will refinancing always save me money?
No. The interest rate, monthly payment, loan term, closing costs, new loan balance, cash received, financing goals, and amount of time you expect to keep the mortgage can all affect the final financial result.
Tell Us What You Want Your Mortgage to Do
Whether your goal is a lower payment, lower interest rate, monthly savings, cash from equity, a shorter term, faster payoff, debt consolidation, more payment stability, or adding your spouse to the mortgage, VA Help Center can help review the VA refinance options available for your situation.
REVIEW MY VA REFINANCE OPTIONS Call 801-871-3739VA Help Center, LLC is a private mortgage company and is not affiliated with, endorsed by, or acting on behalf of the U.S. Department of Veterans Affairs or any other government agency.
VA refinance availability, interest rate, monthly payment, loan amount, cash available, loan term, appraisal, loan-to-value, borrower changes, credit and income requirements, funding fee, closing costs, seasoning, recoupment, net tangible benefit, entitlement, occupancy, and other terms are subject to applicable VA requirements, lender guidelines, borrower qualification, property value, and applicable law.
Changes to property title or ownership are separate from changes to the borrowers legally obligated on a mortgage. Borrowers should obtain appropriate legal or title guidance when making changes to property ownership.
Shortening a loan term can increase the required monthly payment even when the interest rate is lower. Extending a loan term may reduce the monthly payment while increasing total interest paid over time.
Refinancing may increase the total finance charges paid over the life of the loan. Using home equity to pay unsecured debt converts that obligation into debt secured by the borrower's home and may extend the repayment period. Borrowers should compare their existing mortgage and obligations with the proposed refinance before proceeding.