Refinancing with VA Loan – Ultimate Guide

Owning a home is a significant investment, and VA loans offer veterans and eligible service members a chance to secure a mortgage with several benefits. Refinancing your existing mortgage with a VA loan can be a strategic way to save money and improve your financial standing. This guide explores the ins and outs of VA loan refinancing, helping you decide if it’s the right option for you.

What is VA Loan Refinancing?

VA loan refinancing involves replacing your current mortgage with a new one guaranteed by the Department of Veterans Affairs (VA). This can potentially lead to lower interest rates, reduced monthly payments, or a chance to shorten your loan term.

Benefits of Refinancing with a VA Loan

  • Lower Interest Rates: VA loans typically offer lower interest rates compared to conventional loans. Refinancing with a VA loan can significantly reduce your monthly payments and save you money over the life of the loan.
  • Reduce Monthly Payments: If you’re struggling with your current mortgage payment, a VA refinance can lower your monthly obligation, freeing up cash for other expenses.
  • Shorten Loan Term: Refinancing allows you to pay off your loan faster by switching to a shorter loan term. This can help you build equity in your home quicker.
  • Improved cash flow: A lower interest rate or a longer loan term can translate to lower monthly payments, easing your financial burden.
  • Cash-out refinance: VA loans allow for cash-out refinancing, where you can borrow against the equity you’ve built up in your home to access funds for various purposes like home renovations, debt consolidation, or educational expenses.
  • Streamlined Process: VA refinancing often requires less documentation and has lower closing costs compared to conventional refinancing.

Eligibility for VA Loan Refinancing

To refinance with a VA loan, you must meet specific eligibility requirements:

  1. Military Service: You must be a veteran or active-duty service member who meets the VA’s minimum service requirements.
  2. Entitlement: You must have enough VA loan entitlement remaining. This is a dollar amount determined by the VA based on your military service and previous VA loan use.
  3. Current Mortgage: The property you’re refinancing must be your primary residence.
  4. Debt-to-Income Ratio: You must have a good debt-to-income (DTI) ratio, typically below 60%.
  5. Creditworthiness: You’ll need a minimum credit score set by your lender.

Type of VA Loan Refinancing

There are two primary VA refinance options

  • VA Interest Rate Reduction Refinance Loan (IRRRL): This is the most streamlined option, ideal for lowering your interest rate and monthly payment without needing a cash payout.
  • VA Cash-Out Refinance Loan: This option allows you to tap into your home equity by receiving cash in addition to a new loan amount. You’ll need a minimum loan-to-value (LTV) ratio to qualify, typically 80% or less.

Process for Refinancing with a VA Loan

  1. Shop Around: Compare rates and terms from different VA lenders to find the best deal.
  2. Gather Documents: You’ll need proof of income, military service, and property ownership.
  3. Formal Application: Submit a formal application to your chosen lender.
  4. Loan Approval: The VA will review your eligibility and approve the loan.
  5. Closing: Finalize the refinance process and sign the closing documents.

Factor to Consider

Consider these factors before refinancing:

  • Interest Rate Savings: Will the new interest rate be significantly lower than your current rate to justify the refinancing costs?
  • Loan Term: Are you comfortable with a potentially shorter loan term and higher monthly payment (if applicable)?
  • Closing Costs: Factor in all closing costs associated with the refinance to ensure the long-term savings outweigh the upfront investment.
  • Financial Goals: Does refinancing align with your financial goals, such as debt consolidation, home improvements, or early loan payoff?

Maximizing Your VA Refinance Experience

  • Obtain Your Certificate of Eligibility (COE): Request your COE from the VA to streamline the pre-approval process.
  • Compare Rates and Terms: Don’t settle for the first offer. Shop around and negotiate for the best possible rate and terms.
  • Consider a Streamline Refinance: If you already have a VA loan and primarily seek a lower interest rate, a streamline refinance can be a faster and simpler option.
  • Factor in Closing Costs: Understand all associated closing costs and ensure the long-term savings outweigh the upfront investment.
  • Work with a Reputable Lender: Choose a lender experienced in VA loans and known for excellent customer service.

VA Loan Refinancing FAQs

Does refinancing with a VA loan require an appraisal?

Not always. In some cases, the VA may waive the appraisal requirement if your loan amount stays close to your original loan amount.

Are there any closing costs associated with VA loan refinancing?

Yes, there are usually closing costs involved, such as origination fees, title insurance, and recording fees. You can negotiate some of these charges with the lender.

How much can I save by refinancing with a VA loan?

The potential savings depend on various factors, including your current interest rate, the new interest rate you qualify for, and the loan term.

Is there a penalty for refinancing my current VA loan?

There is no prepayment penalty associated with VA loans, so you can refinance without any worries about additional fees for paying off your loan early.

How much can I cash out when refinancing with a VA loan?

The amount you can cash out depends on your entitlement remaining and the current value of your home. Generally, you can cash out up to 100% of your home’s value minus the outstanding loan balance.

What if my credit score is not ideal?

Even with a less-than-perfect credit score, it’s still worth exploring your refinancing options. Some lenders may offer VA loans to borrowers with credit scores as low as 620.


Refinancing with a VA loan can be a powerful tool for veterans and service members to save money on their mortgages. By understanding the eligibility requirements, process, and benefits, you can make an informed decision about whether VA loan refinancing is the right option for your financial goals.