Last updated: September 2025
Quick Answer
Yes, refinancing with a VA loan may make sense if you can lower your interest rate through an IRRRL, access equity with a cash-out refi, or switch from an FHA or conventional loan to eliminate private mortgage insurance (PMI).
When does refinancing with a VA loan make sense?
In 2025, eligible veterans and active-duty service members can refinance into a VA loan for several strategic reasons:
- Lower your interest rate through a streamlined VA IRRRL
- Tap home equity with a cash-out refinance
- Remove PMI by switching from an FHA or conventional loan
- Improve loan terms or shorten your repayment period
VA refinances are available even if your current mortgage is not a VA loan. As long as you meet eligibility requirements and lender guidelines, the VA program may offer a better path forward.
When not to refinance with a VA loan
Refinancing isn’t always the right tactical move.
Consider holding off if:
- You plan to sell soon: If you’re moving or selling within the next year or two, you may not recover closing costs before you move.
- Your current rate is already competitive: If your existing loan is close to current market rates—and you’re not removing PMI or tapping equity—you may see little savings.
- You don’t have enough equity: VA cash-out refinances typically require at least 10% equity. Refinancing too early can increase your balance and limit flexibility later.
- You’ll add more debt or extend your term: Rolling short-term debt or restarting a 30-year clock might lower payments today, but cost you more in the long run.
Let’s Build Your Path to Homeownership
At Salute Mortgage, we combine veteran-led guidance with clear, tactical support—whether you're buying your first home, refinancing, or planning for long-term equity.
Option 1: Lower your rate with a VA IRRRL
The Interest Rate Reduction Refinance Loan (IRRRL)—also known as the VA streamline refinance—is the fastest and most cost-effective way to refinance an existing VA loan.
Key benefits of an IRRRL:
- No appraisal required
- No income verification required
- Minimal documentation
- Lower VA funding fee (0.5%)
- Can roll closing costs in the new loan
- May lower your monthly payment significantly
To qualify, you must:
- Currently have a VA-backed mortgage
- Certify previous occupancy (you lived in the home at some point)
- Refinance to a lower interest rate unless switching from an ARM to fixed rate
- Meet the net tangible benefit test (your new loan must offer a clear financial gain)
IRRRLs are designed to simplify refinancing and reduce your costs. They can often close in under 30 days when using a VA-experienced lender.
Option 2: Use a VA cash-out refinance to access equity
The VA cash-out refinance lets you convert your home equity into cash. This option is available whether you currently have a VA loan, an FHA loan, or a conventional mortgage.
What you can do with a VA cash-out refi:
- Consolidate high-interest debt
- Pay for home improvements
- Cover college tuition or medical bills
- Refinance an existing non-VA loan into a VA loan
VA cash-out loans require:
- A new VA appraisal
- Full income and credit verification
- Meeting standard residual income and debt-to-income (DTI) requirements
- Sufficient equity, usually a max 90% LTV, though some lenders allow 100%
This option is ideal for veterans who want to eliminate PMI on a current FHA loan, refinance out of a high-rate conventional loan, or simply take advantage of their growing home equity.
Option 3: Refinance from FHA or conventional to VA
If you’re a qualified veteran currently paying PMI on an FHA or low-down conventional loan, switching to a VA loan could eliminate that monthly cost.
Example:
- Current FHA loan at 6.5% with 0.85% PMI
- Refinance to a VA loan at 5.75% with no PMI
- Potential savings: $100–$250/month
VA loans do not require monthly mortgage insurance—even with a 0% down payment—making them an attractive refinance option.
In this scenario, the refinance is processed as a VA cash-out loan, even if no cash is taken out. That means you’ll need:
- A new COE (Certificate of Eligibility)
- Full documentation
- A new appraisal to confirm your home’s value
- To pay the VA funding fee, unless you’re exempt
VA refinance funding fees in 2025
Here’s what to expect in terms of funding fees for VA refinance options:
| Refinance Type | First Use | Subsequent Use |
|---|---|---|
| VA IRRRL | 0.5% | 0.5% |
| VA Cash-Out Refinance | 2.15% | 3.30% |
If you have a VA disability rating of 10% or more, the funding fee is waived.
Closing costs and break-even point
Like any refinance, VA refinances involve closing costs, including:
- Origination fees
- Appraisal (for cash-out)
- Title insurance
- Recording and transfer fees
- Prepaid taxes and insurance
Your lender may offer options to:
- Roll closing costs into your new loan balance
- Accept a slightly higher rate to cover costs via lender credit
To decide whether a VA refi is worth it, calculate your break-even point—the number of months it will take for your savings to exceed your costs.
Example:
- Closing costs: $4,000
- Monthly savings: $200
- Break-even point: 20 months
If you plan to keep the home longer than 20 months, the refinance pays off.
Who qualifies for a VA refinance?
To be eligible for a VA refinance in 2025, you must:
- Be a veteran, active-duty service member, or eligible surviving spouse
- Have a valid Certificate of Eligibility (COE)
- Occupy (or have occupied) the home as your primary residence
- Meet lender income and credit requirements
- Have sufficient equity for a cash-out refi (typically 10% or more)
Most lenders require a credit score of 620 or higher; however, some may accept lower scores with strong compensating factors.
When not to refinance with a VA loan
Refinancing isn’t always the right move. You may want to hold off if:
- You plan to sell or move within 1–2 years
- Your current rate is already low, and you’re not eliminating PMI
- You don’t have enough equity for a cash-out refinance
- Closing costs outweigh potential monthly savings
Always ask your lender for a loan comparison worksheet that shows monthly savings, closing costs, and the long-term impact of the refi.
FAQ: Refi with VA loan
Yes, eligible veterans can refinance from an FHA loan to a VA loan using a cash-out VA refinance, even if no cash is taken out. This move often eliminates PMI.
IRRRL stands for Interest Rate Reduction Refinance Loan, also known as a VA streamline refinance. It’s for current VA borrowers and offers fast, low-cost refinancing with minimal documentation.
Most lenders allow up to 90% LTV, meaning you need at least 10% equity in your home. Some allow 100%, but guidelines vary.
Only VA cash-out refinances require an appraisal. IRRRLs do not require one, making them faster and more flexible.
Yes, if you have a VA disability rating of 10% or more, the funding fee is waived on both IRRRL and cash-out refinances.
Ready to refinance with your VA loan benefit?
Whether you want to lower your interest rate, drop PMI, or turn equity into cash, refinancing with a VA loan can be a smart move in 2025.
The key is to choose the right refinance type—and work with a VA-specialized lender who can guide you through the process quickly and clearly.
