Is a no-cost VA refinance free?
Ask how the costs are covered. The lender might give you a credit in exchange for a higher rate, or the offer might add costs to your loan. Compare the rate, new balance and cash due.
Will a VA IRRRL Save You Money After Fees and a Longer Loan Term?
AI-generated illustrations for this guide.
A VA IRRRL can save you money when it cuts more in interest than it adds in fees. A lower payment can help your budget. If you start over with a longer loan, you could also pay more by the time it’s paid off.
IRRRL is short for Interest Rate Reduction Refinance Loan. It’s also called a VA streamline refinance. It replaces a VA loan you already have. Use your latest mortgage statement and a written offer to compare what you pay each month, what you’ll owe when you expect to sell, and when each loan ends. See VA’s guide to the streamline refinance.
What fees will you pay?
Ask for a Loan Estimate. It lists fees like lender charges and title costs. Look for points, which are fees you pay to get a lower rate. Check any lender credit, too. A credit can cut what you pay at closing and may come with a higher rate. See where to find fees and credits on a Loan Estimate.
The VA funding fee for an IRRRL is 0.5%. Veterans who receive VA disability compensation for a service-connected condition are exempt. VA lists other ways to qualify for a fee waiver. Ask the lender to show which costs you’ll pay in cash and which it can add to the new loan. Rolling fees into the loan raises your balance. You’ll pay interest on those fees over time.
Look at cash due at closing on its own. That number can include items like prepaid interest and money to start a new escrow account for taxes and insurance. Ask how those amounts and any refund from your old escrow account affect your cash. Use the CFPB’s Loan Estimate guide to find those lines.
How long will it take to earn back the fees?
For a quick check, divide your loan fees after credits by the drop in your monthly principal and interest. Principal is the amount you borrowed. Interest is what the lender charges you to borrow. Leave taxes and insurance out of the payment comparison.
If you pay $3,000 in loan fees in cash and save $150 a month, it takes about 20 months for the lower payment to make up for the cash you spent. When you roll fees into the new loan, use the quick check as a rough guide. Ask for the loan balance at the month you expect to sell or refinance. You could owe more at that point even after months of lower payments.
What does VA check?
VA generally requires the monthly drop in principal and interest to make up for the fees it counts within 36 months. The VA funding fee and items such as taxes, insurance and escrow deposits are left out of that test. Include the funding fee, if you owe it, when you compare your own costs. See VA’s fee payback guidance.
The new loan must offer a clear benefit. VA calls this a net tangible benefit. If you go from one fixed rate to another, the rate must drop by at least half a percentage point. The rules differ when you change rate types, and limits can apply if you pay points. See the federal VA refinance rules.
What if you start over at 30 years?
Suppose you owe $300,000 on a VA loan with 20 years left. A new 30-year loan rolls in $4,000 in closing costs and a $1,520 VA funding fee. That brings the new balance to $305,520. Here’s how the two loans compare if you make the scheduled payments.
| What to compare | Keep your loan | Start a new loan |
|---|---|---|
| Years to pay it off | 20 | 30 |
| Fixed rate* | 6.5% | 6.0% |
| Monthly principal and interest* | $2,237 | $1,832 |
| What you still owe after 5 years | $256,767 | $284,300 |
| Total payments from now to payoff* | $536,813 | $659,429 |
*For illustrative purposes only. Rates and payments are examples, not loan offers. Figures are rounded and leave out taxes, insurance and escrow. The new loan payments already include the fees added to the balance.
The new bill drops by about $405 a month. That covers the fees VA counts in about 10 months. After five years, you’d pay about $24,300 less in monthly bills but owe about $27,500 more. If you sold then, the higher payoff would leave you about $3,200 behind. If you kept the new loan through payoff, you’d pay about $122,600 more from today.
Ask for a shorter term, too. A new 20-year loan at 6% with the same $4,000 in closing costs and the VA funding fee rolled in would take about 84 months to earn back the fees VA counts. That’s past VA’s 36-month limit.
With a lower-cost offer at the same 6% rate, the math changes. If you roll in $1,500 in closing costs and the VA funding fee, the 20-year loan would cost about $66 less per month and about $15,800 less through payoff than keeping your old loan. Ask for written offers so you can compare the fees for each term.
What should you ask for in writing?
- For the loan you have: Get the rate, monthly principal and interest, payoff amount and time left. Ask the company that collects your payments for a current payoff quote.
- For the new loan: Ask for the rate and term, the cash you need at closing, and the amount you’ll borrow after any fees you roll in.
- For both loans: Ask what you’ll pay in interest and loan fees and what you’ll still owe at the same point in time. Use the year you might sell or refinance again. If you plan to stay, also compare the cost through payoff.
You can try our refinance calculator for a first look. Then ask the lender to run the numbers using the actual offer, including a shorter term if keeping your payoff date matters to you.
Common questions about VA IRRRL savings
Can a lower rate still cost me more?
Yes. Fees can raise your balance and a longer term gives interest more time to build. Compare what you’ll pay and what you’ll still owe on the date you expect to be done with the loan.
What if I might move soon?
Ask for the expected payoff balance for the month you might sell. Compare that balance plus the payments and any fees you pay in cash with what you’d spend by keeping your loan.
What if I’ve already moved out?
You may still be able to use an IRRRL if you have a VA loan on the home and can certify that you used to live there. With a VA cash-out refinance, you must plan to live in the home. See how a VA IRRRL works after you move out.
More help with your refinance
South Carolina VA IRRRL
See how the VA streamline refinance works.
Refinance calculator
Get a first estimate of your new payment and fee payback.
Options for borrowing from your home
Compare home equity loans, HELOCs and cash-out refinancing if you need cash.
Explore VA streamline refinancing in Columbia, Greenville or Hilton Head Island.
Your next step
Want help comparing your VA loan and a refinance?
Tell us your current rate, balance and time left on the loan. If you have an offer, share its rate, term and fees. We can help you see how the choice affects your bill now and what you pay over time.
General education. Loan terms and eligibility depend on a full review. Beaufort Lending, NMLS #1703543. Equal Housing Opportunity.
Beaufort Lending is a private mortgage broker with no affiliation with the U.S. Department of Veterans Affairs.