Refinancing with a VA Loan: How Veterans Can Save Even More

Have a VA loan and am wondering if there’s more value left to tap?
For many Veterans, refinancing isn’t about timing the market. It’s about knowing where the VA loan program quietly builds in savings others miss.

Rates may not be ideal in 2025, but VA refinancing options still offer real financial breathing room- through lower fees, flexible rules, and strong borrower protections.

Let’s go over how VA refinancing works, what the current market means for your next move, and how to make sure every dollar counts.

Why VA Loans Already Save You Money

VA loans are structured to protect borrowers, not lenders.
If you qualify, you already benefit from built-in cost controls that make a difference both upfront and over time.

Here’s what stands out:

• No Funding Fee (for some borrowers): Veterans receiving VA disability compensation pay no funding fee. The same applies to surviving spouses of Veterans who died in service or from service-connected conditions.
  Others pay between 2.15% and 3.30%, depending on down payment and prior loan use.
• No Private Mortgage Insurance (PMI): Conventional loans add PMI when the down payment is under 20%. VA loans don’t. That’s often a $150-$300 monthly saving.
• Closing Cost Limit (1 Percent Rule): Lenders can charge only 1% of the loan amount to cover origination and processing. You don’t pay extra for application, document prep, or underwriting.
• Seller Concessions Allowed: Sellers can cover all mortgage-related closing costs plus up to 4% in additional concessions, like prepaid taxes or insurance.
• Roll Closing Costs into the Loan: You can fold closing costs into your total loan. You’ll pay interest on them, but it keeps cash in hand during purchase or refinance.
• Termite Inspection Rule Update: Since mid-2022, borrowers can pay for their own termite inspections when required – removing one more barrier to smooth closing.

Takeaway:
If you’re a Veteran or eligible borrower, these features already help you save more than most buyers – even before refinancing enters the picture.

VA Refinance Paths: Streamline or Cash-Out

VA refinancing comes in two main forms. Each one suits different financial goals.

A. Interest Rate Reduction Refinance Loan (IRRRL)

This is the VA Streamline Refinance – designed to reduce your rate or monthly payment with minimal hassle.

Key points:

• Fast process: No full appraisal, income verification, or new credit report required.
• Eligibility: At least 6 payments made, and 210 days must pass from the first payment on your current VA loan.
• Funding fee: Only 0.50% of the loan amount.
• No cash out: The only exception is reimbursement (up to $6,000) for approved energy-efficient improvements completed within 90 days.
• Proof of benefit: The VA requires a “tangible benefit” – a lower rate or reduced payment – and you must know how long it takes to recoup refinance costs.

Best for:
Veterans who want to lower payments or switch from an Adjustable-Rate to a Fixed-Rate mortgage.

B. VA Cash-Out Refinance

This option lets you access home equity for larger financial goals like home repairs, education, or debt consolidation.

Key points:

• Up to 100% cash-out potential: You can borrow against the full appraised value of your home if your lender allows.
• Full underwriting and appraisal required.
• Funding fee: Up to 3.30% for subsequent use with no down payment.
• Timing:
  • VA-to-VA refinances require 6 payments and 210 days since the first payment.
  • Non-VA refinances follow lender-specific timelines.
• Savings rule (Type I Cash-Out): If the new loan doesn’t exceed your current balance, refinance costs must be recouped within 36 months, and the new rate must be at least 0.5% lower than before.

Best for:
Homeowners needing access to cash while keeping long-term stability in mind.

Takeaway:
IRRRL simplifies your payment. Cash-out gives flexibility.
The right choice depends on whether your goal is saving monthly or funding a specific expense.

The 2025 Market Context: High Rates, Low Supply

Even the best loan program works within broader market limits. Here’s where things stand: