Guide to VA Home Loan Refinancing Options

Refinancing your VA home loan allows you to replace your current mortgage with a new one that offers different terms. A VA-backed refinance is beneficial if you want to access home equity or switch from a non-VA loan to a VA loan. To qualify, you need a certificate of eligibility and meet lender requirements. VA refinancing is handled by lenders like banks and mortgage companies.

How it works
Refinancing pays off your existing mortgage, enables borrowing a higher amount, and may provide cash for other needs.

The loan amount varies by lender, and you can use the funds for any purpose. VA refinance options can lower your interest rate and monthly payments, while adjusting the loan term. To get started:

Find a VA-approved lender

Submit your financial documents

Obtain a VA certificate of eligibility, possibly through your lender

Get your property appraised and inspected by an authorized appraiser

Pay the VA funding fee unless exempt due to disability

Complete the refinancing process

Lower interest rate options
Existing VA loan holders can consider an Interest Rate Reduction Refinance Loan (IRRRL) to lower payments. This streamline refinance simplifies the process, often requiring no income verification or appraisal, and allows incorporating refinancing costs into the loan. It provides quick approval, minimal paperwork, and lower fees compared to cash-out refinancing.

IRRRL / Streamline Refinance
Known as VA streamline refinancing, this option requires less documentation, often no income or employment verification, and no appraisal. It is designed for current VA loan holders seeking lower interest rates at reduced costs with minimal hassle.

Documentation requirements
The VA Home Loan Refinance Calculator does not require a credit report. Lenders only check that fewer than two late payments occurred in the past year. Some lenders may set minimum credit scores, but VA standards primarily review the last year’s mortgage history. For streamline loans, minimal paperwork and no appraisal are needed.

Interest rates
To qualify, borrowers must have no more than one late payment in the past 12 months. Refinance should lead to reduced monthly payments or switch from an adjustable-rate to a fixed-rate loan. Cash-out refinancing during a streamline is generally not permitted.

Home loan refinance for cash-out
A VA cash-out refinance replaces your existing mortgage and allows you to tap into your home equity. Unlike IRRRL, it involves detailed documentation, including recent pay stubs, W2s, and tax returns. The loan amount can be up to 90% of the current appraised value.

Conventional to VA refinance
Refinancing from a conventional to a VA loan can be beneficial when property values decline. Conventional loans typically allow refinancing up to 90% of the home's value. If the current mortgage exceeds this, you might consider switching to a VA loan, which offers refinancing up to 100% of the home's value.

If the interest rate on a VA loan is lower than your current loan, refinancing might save you money. Consulting with VA lenders can help determine if a VA refinance is suitable for your situation. Evaluating the numbers will reveal if refinancing makes financial sense.