VA Loan Refinancing
You can refinance a VA loan in two main ways: the Interest Rate Reduction Refinance Loan (IRRRL), a streamline that lowers your rate or payment, and the VA cash-out refinance, which turns equity into cash. A non-VA loan can also be converted into a VA loan with a cash-out refinance, even if you take no cash. Which fits depends on your goal.
Key Takeaways
- The IRRRL needs an existing VA loan, has a 0.50% funding fee and allows no cash back.
- The cash-out refinance has a funding fee of 2.15% for first use and 3.30% for subsequent use, unless you are exempt.
- A termite inspection and appraisal are required on cash-out refinances, but not on an IRRRL in most cases.
- Both options need a benefit to you. For the IRRRL, fees generally must be recouped within 36 months.
What are my VA refinance options?
| Feature | IRRRL (streamline) | Cash-out refinance |
|---|---|---|
| Existing loan | Must be a VA loan | VA, FHA, conventional or other loan |
| Cash back | None (up to $6,000 for energy-efficiency improvements is possible) | Yes, from equity |
| Funding fee | 0.50% | 2.15% first use; 3.30% subsequent use |
| Appraisal | Not required in most cases | Required |
| Termite inspection | Not required | Required |
| Income verification | Generally limited | Full income and debt review |
| Typical goal | Lower rate or payment, or ARM to fixed | Cash, debt payoff, or conversion to VA |
1. VA streamline refinance (IRRRL)
The IRRRL replaces your existing VA loan with a new VA loan to lower your rate, lower your payment, or move from an adjustable rate to a fixed rate. It is designed to be simple.
- No appraisal in most cases, and no equity required
- No pay stubs, W-2s or tax returns in most cases, though income verification applies if your principal and interest payment rises by more than 20%, for example from an adjustable to a fixed rate
- Credit: 580 for loans up to $1,000,000, with higher scores for larger loans
- Funding fee of 0.50%, unless you are exempt
- Seasoning: the later of 210 days from your first payment and 6 payments made, with no 30-day mortgage lates in the past 12 months
- Rate must drop at least 0.50% for fixed-to-fixed and at least 2.00% for fixed-to-adjustable. Adjustable-to-fixed has no minimum drop, so the fixed rate may be higher
- Fees must be recouped within 36 months
- The home does not have to be your primary residence if you lived in it before
See the VA streamline refinance IRRRL program and IRRRL guidelines and credit requirements, plus how to qualify, documents needed and the streamline funding fee.
2. VA cash-out refinance (VA to VA)
A cash-out refinance is popular with veterans who want a lower rate and cash from their equity. VA allows up to 100% of the reasonable value, though many lenders cap at 90%. At Lendia, select programs can reach 100% with full entitlement, pricing adjustments and approval. Your loan must provide a tangible benefit, such as a lower rate, a shorter term, an end to monthly mortgage insurance, or a loan of 90% or less of the home’s value.
You can use the cash to pay off or consolidate debts, make home improvements, combine a first and second mortgage into one VA loan, pay tuition, or cover emergencies. Consider the funding fee of 2.15% to 3.30%, unless you are exempt, and the costs of a new loan. Credit starting as low as 580 may be possible on select programs. Read VA cash-out refinance guidelines and credit requirements for details.
3. VA cash-out refinance (non-VA loan to VA loan)
If you bought with a conventional, FHA or other loan and are now VA eligible, you can convert it into a VA loan. It falls under cash-out refinance, but you do not have to take any cash. You can simply move to a VA loan without monthly mortgage insurance. The same cash-out guidelines apply, including the appraisal and termite inspection. See VA loan refinance options for the full set of paths.
What do the numbers look like?
Example 2: cash-out (illustration only). A veteran with full entitlement owns a home worth $900,000 and owes $500,000. The lender caps the new loan at 90%, or $810,000. The funding fee at 2.15% (first use) is $17,415. Assume closing costs of $12,000. If the fee is financed, cash back is roughly $810,000 – $500,000 – $17,415 – $12,000 = $280,585. Actual limits and costs vary.
Compare the lower rate against the costs, and remember that a cash-out refinance resets your loan and uses equity. See refinancing your mortgage, what to consider before refinancing and VA IRRRL vs. conventional refinance.
How soon can I refinance a VA loan?
For an IRRRL, the seasoning rule is the later of 210 days from your first payment and 6 payments made. For a cash-out refinance, timing rules vary by lender. See how long to wait before refinancing a VA loan.
What should California homeowners consider?
Many California homeowners have large amounts of equity and low-rate first mortgages. Giving up a very low rate for a cash-out can cost more than a separate home equity option. Compare lowering your rate with taking cash out before you choose. Also see what a VA cash-out refinance is and what a VA IRRRL is.
At Lendia, we help you choose the right VA refinance
At Lendia, we compare your options across multiple lenders and show you the break-even before you commit. Rates and terms depend on your situation; approval requires qualification. Contact us or get a rate quote now, and a Licensed Lendia California Loan Officer will walk you through it.
Frequently Asked Questions
Which VA refinance is right for me?
The IRRRL fits a lower rate or a switch from adjustable to fixed on an existing VA loan. The cash-out fits when you need funds from equity or want to convert a non-VA loan.
Can I refinance a non-VA loan into a VA loan?
Yes, with a VA cash-out refinance. You do not have to take cash out.
Do I need an appraisal for an IRRRL?
Not in most cases.
Can I take cash out with an IRRRL?
No. An IRRRL allows no cash back, except up to $6,000 for energy-efficiency improvements.
Is the VA funding fee waived on a refinance?
Not unless you are exempt, for example if you receive VA disability compensation. The IRRRL fee is 0.50%.
How low can my credit score be?
For an IRRRL, 580 for loans up to $1,000,000, with higher scores for larger loans. Cash-out depends on the program.
Talk to a Licensed Lendia California Loan Officer
At Lendia, we review your situation and show you the programs you qualify for.