How Often Can You Refinance a VA Loan?

Refinancing can be a great way to lower your interest rate, reduce your monthly payment or work toward other financial goals. But how many times can you do it?

With a VA loan, refinancing isn’t a one-time opportunity. As long as you meet the requirements, you can refinance whenever it makes sense for your situation.

There are some important guidelines to keep in mind, though. Here’s what to know if you’re thinking about refinancing your VA loan.

Reasons to Refinance More Than Once

With both types of VA refinances, homeowners must receive a clear, tangible financial benefit from refinancing. This is a basic requirement of the VA loan program, and all refinances must financially benefit the borrower for a lender to approve them.

Here are just a few times refinancing your VA loan multiple times may be financially beneficial:

Lower Your Interest Rate

If VA loan interest rates drop below the interest rate you currently have, then refinancing is often financially beneficial. Not only will it save you on your monthly payment, but it can save you on long-term loan costs, too.

As a general rule of thumb, it’s usually best to wait until market rates have fallen at least 1% below your current rate often makes the most financial sense. But for some homeowners, even a 0.5% drop could make refinancing worthwhile — it all depends on your unique situation.

Talk to a Veterans United Home Loan specialist today to discuss if a new interest rate makes sense for you.

Reduce Your Monthly Payment

If you need a lower monthly payment, then refinancing can also make financial sense. To achieve a lower payment, you’d either need to qualify for a lower interest rate or refinance into a longer-term loan, spreading your balance out over more months.

The latter approach would mean more in long-term interest costs, so you’ll want to run the numbers to make sure the move is worth it. If you’re really struggling financially, it may just be best to sell your home and purchase a lower-cost home until you get back on your feet.

Shorten Your Loan Term

You can also opt to refinance into a shorter loan term than your current one. Unlike other approaches, this would mean taking on a higher monthly payment, but it will typically come with a lower interest rate, fewer long-term costs and a faster payoff timeline.

Refinancing to a shorter term is a smart move if you have enough money to take on a higher payment and want to pay off your house faster than your current loan will allow.

Switch From an Adjustable-Rate Loan to a Fixed-Rate Loan

If you have a VA ARM or adjustable interest rate on your current loan, it means your rate and monthly payment can go up over time, making it hard to budget and plan for. Refinancing can help you secure a fixed-rate loan instead, bringing some consistency to your household finances.

Understand that adjustable-rate mortgages often have lower interest rates than fixed-rate ones at the start, but those rates can rise over time, equating to a costlier loan and higher monthly payments in the long run.

Learn more about how VA ARMs compare to fixed-rate mortgages.

Need Cash for a Major Expense

If you have equity in your home, a VA Cash-Out refinance could a great option. This type of refinance allows you to turn your home equity into cash. Homeowners often use these funds for home improvements, college tuition or paying off higher-interest debt.

Keep in mind that cash-out refinances typically come with higher interest rates than traditional refinances. You’ll also be increasing your loan balance, which means a longer repayment timeline and higher long-term costs.

Plus, tapping into your equity reduces the cushion you have in your home, which can be risky if property values decline.

Get Rid of Mortgage Insurance

Conventional loans often come with Private Mortgage Insurance (PMI), while FHA loans typically have Mortgage Insurance Premiums (MIP). Both can add to your monthly payment, and with MIP, you’ll pay it upfront at closing, too.

VA loans don’t require mortgage insurance, so if you have an FHA loan or conventional loan and are currently paying for MIP or PMI, then refinancing into a VA loan can help you get rid of that extra cost and bring down your monthly payment.

Cost of VA Refinancing Your Home Multiple Times

Refinancing your mortgage loan will always come with closing costs, no matter what type of loan you’re using. Generally, these run anywhere from 3% to 5% of your total loan amount. With VA loans, you’ll also owe a VA Funding Fee, which comes to 0.5% of the loan amount of VA IRRRLs or 2.15% to 3.30% for VA Cash-Out refinances.

In both scenarios, you have options for covering those expenses. With IRRRLs, you can roll the funding fee and closing costs into your loan amount, allowing you to pay them off over time as part of your monthly payment. With cash-out refinances, you can often use the cash you get from the loan to cover your closing costs.

Homeowners looking to finance their closing costs will need to meet the VA’s time-to-recoup requirements for a refinance. You can use our simple VA refinance calculator to run the numbers for your specific situation.

Example Calculation of Multiple VA Refinances

It’s important to run the numbers before choosing to refinance your VA loan multiple times. Let’s break it down with a hypothetical example:

Original VA Loan

Say you purchased a home with a $300,000 VA loan at a 6.5% interest rate on a 30-year fixed mortgage with no down payment and the required VA Funding Fee:

• VA Funding Fee: 2.15% of $300,000 = $6,450
• Total loan amount: $306,450
• Interest rate: 6.5%
• Loan term: 30 years
• Monthly principal and interest payment: $1,937

First VA IRRRL Refinance

After five years of payments, your loan balance is approximately $284,000. VA loan rates have dropped significantly, so you refinance using a VA IRRRL at 5.5%.

• VA IRRRL Funding Fee: 0.5% of $284,000 = $1,420
• New loan amount (fee rolled in): $285,420
• New loan term: 25 years
• New monthly payment: $1,728

Monthly savings by refinancing: $1,937 – $1,728 = $209

Second VA IRRRL Refinance

Now 10 years into homeownership, your loan balance has dropped to approximately $253,000. Interest rates fall again, and you refinance into a 20-year loan at 4.5%.

• VA IRRRL Funding Fee: 0.5% of $253,000 = $1,265
• New loan amount: $254,265
• New loan term: 20 years
• New monthly payment: $1,611

Monthly savings by refinancing again: $1,728 – $1,611 = $117

Total savings from original loan: $1,937 – $1,611 = $326/month

Refinancing more than once can help you lock in lower monthly payments and interest rates. In this example, you refinanced twice over 10 years, reduced your monthly payment by over $300 and still stayed on track to pay off the home within the original 30-year timeline.

Over the full 30-year period, you’ll pay approximately $245,024 in interest after refinancing twice. If you had kept the original loan at 6.5% for the entire term, total interest would have reached around $390,859. That’s a savings of about $145,835 in interest over the life of the loan.

Be sure to account for any other fees and compare the amount you'll save in interest to the length of time you plan to stay in the home.

Other Considerations Before Refinancing a Second Time

The savings and monthly payment changes you’ll see are just one factor to take into account when you’re thinking about refinancing multiple times.

For one, you’ll need to ensure you can meet the lender’s qualifying requirements each time. This might mean meeting a VA minimum credit score requirement, having a debt-to-income ratio that falls under the lender’s threshold and enough equity in your property (at least in the case of a cash-out refinance).

Alternatives to Refinancing a VA Loan Multiple Times

Refinancing your mortgage loan several times isn’t your only option if you need a change. You might also want to explore one of these strategies, depending on your goals:

• Loan Modification: If you're facing financial hardship, your lender may allow you to modify your loan terms without refinancing, like extending the loan length to lower monthly payments. This option is typically for borrowers at risk of foreclosure. Homeowners struggling to make mortgage payments should contact their loan servicer as soon as possible.
• Make extra payments: If paying off your loan faster is the goal, consider making extra payments. You can add a little to each monthly payment, make one extra payment per year or split your payments in half and pay every two weeks. Allocating tax refunds or bonuses to your mortgage payment can also help speed things up.
• Take out HELOC or home equity loan: Instead of a VA Cash-Out refinance, you can tap into your home’s equity with a HELOC or home equity loan. This gives you access to cash without changing your existing mortgage.

You can explore other loans and financial products, too, but these typically have higher interest costs than mortgages, home equity loans and HELOCs. Always compare rates and fees before deciding what type of borrowing product to utilize.