The Complete Guide to VA Loan Refinancing Options

The Veterans Administration offers many perks and benefits to Veterans and Servicemembers and their families, including many financial benefits and assistance. The VA offers, for example, VA-backed home loans for qualifying military personnel that help Servicemembers apply for and insure home loans. These home loans often give certain benefits, such as lower or no down payments, better terms, and less strict credit checks. However, in addition to these VA-backed home loans, the VA also offers refinancing options that help Veterans make home payments at monthly payments lower than traditional loans and with lower interest rates.

Understanding VA Loan Refinancing: Which Option is Right for You?

VA loan refinancing is a wonderful way to negotiate better terms for your VA-backed home loan. There are many reasons why you might seek VA refinance options for your home loan. You might be experiencing financial hardship and need a lower monthly payment, or there might be better interest rates available. Also, if you want to transfer other home loans with variable rates to a lower fixed rate on a VA loan, then VA refinancing is an option. The VA loan refinancing program offers many options, including Interest Rate Reduction Refinance Loans (IRRRL), cash-out refinancing, and financial assistance to help Veterans determine their individual needs.

VA IRRRL (Interest Rate Reduction Refinance Loan): Streamline Refinancing Explained

One of the services available to Servicemembers as part of the VA loan refinancing program is interest rate reduction services, or the VA IRRRL program. It allows borrowers to refinance their mortgages to one with a lower interest rate. The primary goal of the VA IRRRL program is to reduce the amount of each monthly payment to a more manageable or stable schedule. Also offered is the VA Streamline refinance, which requires less documentation and underwriting. The VA Streamline refinance might be a good option because:

• Less documentation: For those with limited or no documentation at all.
• No appraisal: A new appraisal is usually not required.
• Lower closing costs: Closing costs are usually similar to other programs, but the VA IRRRL can skip the appraisal, making the final balance lower.

To qualify for the VA IRRRL or VA Streamline programs, the Servicemember must:

• Have a current VA-backed mortgage open for at least 7 months (210 days).
• Be current on mortgage payments and a consistent payment history.
• Have a credit score of 620 or higher.
• The property must be occupied and is the borrower’s primary residence.
• There must be a tangible financial benefit to the borrower.
• No cash-out allowed.
• Be able to pay the funding fee.

VA Cash-Out Refinance: Turning Home Equity into Cash

If you are exploring VA refinancing options to cash out some of the equity in your home, you might consider the VA cash out refinance option. If your home requires extensive and expensive renovations, or you want to pursue home improvement projects, or perhaps you need to pay a large expense—a medical bill or college tuition—then using your home’s equity might be a viable option. The way it works is simple. If you have been making payments on your existing home mortgage and are perhaps halfway through paying off that first loan, you then take out a second mortgage for the remaining balance of your first mortgage, pay off the first one, and then use the remaining balance for your financial needs. You are in effect using your home as collateral against a new loan, one that might have higher payments and interest rates than your first mortgage. This is a good option if you have made at least half the payments on your first mortgage and built-up value, or equity, in your home, or if the value of your home has increased.

A VA cash out refinance works much the same way. A VA cash out refinance offers Servicemembers with VA-backed home loans preferential terms and interest rates lower than most other financial lenders. The VA home loan cash out refinance program is good for debt consolidation in that the interest rates offered to Veterans are often much lower than most other refinance options. There are several steps to this process:

1. First you apply for and are approved for a VA cash out refinance loan to pay off the VA-backed mortgage you should already have.
2. The loan officer at your lending institution of choice will ask you several questions about your financial needs as well as assess your home’s value and equity.
3. After assessing your debt, income, creditworthiness, and loan-to-value (LTV) ratio, the lender approves the loan for a specified amount.

The main difference between a VA cash out refinance and a VA refinancing is that with refinancing, the borrower doesn’t see any of the money. Rather, the loan is renegotiated to better terms for the borrower on an existing loan. For a cash out refinance, you withdraw your home’s equity into cash for immediate use, which results in higher monthly payments and occasionally higher interest rates than the original loan. The refinance is a new loan entirely and often amounts to starting a mortgage over from the beginning for many people, depending on the amount.

To be eligible for a VA cash out refinance loan, you must first meet the eligibility requirements for a VA-backed home loan. You must verify that you own the property and that it is your primary residence. You must meet the lender’s loan-to-value (LTV) requirements and also meet the requirements for the time it will take to recoup the loss of the loan.

How to Choose the Best VA Refinance Lender

The best VA refinance lenders are the ones who understand how the VA home loan systems work, the VA loan refinancing process, and be up to date on the best VA IRRRL rates today. Before you begin, start with a VA loan refinancing calculator so that you understand what your own finances and other factors might do in contributing to the type of rates you qualify for in a IRRRL, a VA Streamline refinance, or a VA cash out refinance. Your VA refinance options might be more limited with one lender than another, and one lender might offer fewer options but better rates. Do your research first and learn for yourself about the best VA IRRRL rates today you have at your disposal. The best VA refinance lenders for you are the ones that meet your needs. Consider the following:

1. Use a VA loan refinancing calculator first to understand what sort of options you qualify for and what VA refinance costs you might face.
2. Find a lender who offers this type of VA refinancing, such as your bank, credit union, or independent lenders. Select one who offers terms and rates you are comfortable with.
3. Apply for a certificate of eligibility (COE) if you do not already have one.
4. Apply to your lender with any information you require, which usually means your social security number, copies of income tax forms and documentation, your federal tax forms from the last two years, and any other required information.
5. Close the VA refinancing paperwork and the VA refinance costs and fees. These are typically 0.5% of the loan for VA IRRRL and 2.3% to 3.6% for a cash out refinancing loan.

The VA suggests the following lenders for VA loan refinancing in 2025:

• Mutual of Omaha
• Lending Tree
• Quicken Loans
• AmeriSave
• Rocket Mortgage

Frequently Asked Questions on VA Loan Refinancing

If you still have questions about VA refinancing, the best IRRRL rates today, or VA refinance costs, read on.