5 Benefits of VA Loan Refinance

The process of obtaining a mortgage loan can be quite demanding. Most mortgage loan borrowers request a high credit score or a low debt-to-income ratio. In addition, high mortgage loans like Jumbo loans require about 10-20% down payment of your loan principal, which is quite high.

However, if you are a retired member or you are actively serving in the military, you can boycott most of these high mortgage loan requirements through the government-insured VA loan.  The VA loan gives you access to a loan with zero down payments and lowers interest.

Furthermore, you can decide to use the VA loan refinance on your current loan in order to access the loan refinance benefits. What are the benefits of VA loan refinance?

In this article, we’ll explain the various types of VA loan refinance and the benefits of using the VA loan refinance.

What Is VA Loan Refinance

The VA loan is a type of mortgage loan insured by the government. The US Department of Veterans Affairs is the agency set up to support all VA loan takers. This loan is available for all members of the military and spouses or families.

The most interesting feature of VA loans is the refinancing option. This gives you access to more loans or extra cash with little interest by refinancing.

Types of VA Loan Refinance

There are two types of VA loan refinance. These are:

  • Interest Rate Reduction Refinance Loan (IRRRL)
  • VA-backed cash-out refinance loan

Interest Rate Reduction Refinance Loan (IRRRL)

The IRRRL is one type of VA loan refinance. Compared to other VA mortgages, it is relatively straightforward. If you are a homeowner and you need the means to lower the interest rate on your existing VA mortgage loan. Then it would be best if you considered the interest rate reduction refinance loan.

The IRRRL was introduced to ease the interest rate on your existing home loans. As a VA loan homeowner, the IRRRL is a loan product you can easily qualify for and access. The loan requirements to qualify for the IRRRL are relatively lenient compared to other loan types.

However, in order to apply, you’d need to have an existing VA loan and a record of timely loan repayment. In addition, you need an average credit score of 738 to access any VA loan refinance option.

What do you need to access the IRRRL?

Below are the requirements needed to access the IRRRL:

  • You must have a current VA loan, and you must be planning to use the IRRRL to refinance your current loan.
  • You’ll need the certificate of eligibility (COE) issued for your existing loan. You can easily request for your COE through your lender. This certificate indicates that you are eligible for the refinance
  • In case you have a second mortgage on your home, you must reach out to your lender. Your lien holder needs to agree to be subordinated in order to make your VA loan the First mortgage.
  • You’ll need to certify that you are currently living or you’ve previously lived in your home with a VA mortgage.

5 Benefits of VA Loan Refinance

VA-backed cash-out refinance loan

While the IRRRL offers you a reduced interest, the VA-backed cash-out refinance gives you an opportunity to access larger loans for extra cash. Here, you can refinance your existing mortgage loan, then draw equity upon your home for extra cash.

With the VA-backed cash-out refinance option, you can replace your current mortgage with a larger mortgage. Then the loan difference is given to you as cash.

Unlike the IRRRL, this refinance option offers a lot of benefits if you want to refinance a non-VA conventional loan. In addition, if you need extra cash to pay off your debt or fund some additional home projects, you can easily opt for the VA-backed cash-out refinance.

Eligibility Criteria for VA-Backed Cash-out refinance

The following are the criteria needed to be met for you to access the VA-backed cash-out refinance:

  • Like the IRRRL, you’d need a certificate of eligibility to access the refinance benefits.
  • You need to meet the standards for loan credit, employment status, and other requirements set by the VA and your lender.
  • With an IRRRL, it is not compulsory for you to live in the home you’re refinancing. However, with the VA-backed Cash Out Refinance, you need to live in the home you want to refinance.

Benefits of VA Loan Refinance

Benefits of  Interest Rate Reduction Refinance Loan, IRRRL

Access to Mortgage Loan With Lower Interest

The Interest rate reduction loan offers you an opportunity to refinance your existing VA loan and access a reduced mortgage loan with reduced interest

You don’t have to pay private mortgage insurance, PMI

If you make a downpayment lesser than 20% of your home value, most conventional lenders will request that you pay Private mortgage insurance, PMI. On average, private mortgage insurance costs about $30-$70 monthly for every $100,000 on your mortgage.

However, you can easily avoid paying for this by opting for a VA loan refinance. You don’t need a downpayment to access VA loan refinance.

Fewer Documentation Needed

Unlike other conventional and Jumbo loans, you only need a few documents to access the IRRRL VA loan refinance. Conventional lenders often request documents to verify your income, asset worth, etc., to affirm if you’re creditworthy.

However, with the IRRRL, you only need a few documents like a certificate of eligibility to access a VA loan refinance. You don’t need to tender your credit, income, or employment status for verification.

VA-backed cash-out refinance loan

You don’t need an existing VA loan

Unlike the IRRRL, you can access the VA-backed Cash-Out refinance loan without an existing VA loan. You can refinance an existing conventional loan to a VA loan. However, you need to meet the eligibility criteria stated above.

Access to Extra Cash

With the VA-backed Cash-Out refinance, you have the freedom to utilize the extra cash gotten from your home’s equity to settle your pressing needs.

No Down Payment Required

Unlike most conventional loans that require a down payment of about 10%-20%. For a VA loan refinance, you don’t need to make any down payment to access any of the refinancing options.


You can use the VA loan refinance to reduce your loan interest rate by refinancing your existing VA loan with the IRRRL. In addition, if you don’t have an existing VA loan and you want to enjoy the benefits of a VA loan refinance, you can opt for the VA cash-out refinance to access extra cash for your immediate needs.

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Christophe Rude

Christophe Rude

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