Home Loan Refinancing and VA Loan Funding Fees

VA borrowers who want to refinance have a variety of options--some borrowers want to refinance “VA to VA”, others want to refinance from an FHA mortgage to a VA loan, and conventional borrowers who are eligible for VA loans have been granted more borrowing power to refinance from conventional to VA.

One thing VA borrowers need to remember when refinancing is that the VA loan funding fee, which most borrowers experience on their first VA home loan except for those eligible for VA disability pay, goes up for “subsequent use” VA loans.

First VA Loan vs. Second VA Loan Funding Fees

Your first VA loan of any kind features a lower VA funding fee than the second time you use your VA loan benefits. The VA loan funding fee is subject to change due to legislation or alterations of the VA home loan program, but it’s generally between 2.1% and 2.4% at the time of this writing, depending on whether the applicant is active duty, guard or reserve. The fee is subject to a discount on new purchase loans if the borrower makes a down payment of 5% or more.

Funding Fees For VA IRRRLs

VA loan funding fees for Interest Rate Reduction Refinancing Loans (IRRRLs) and loan assumptions is much lower. Borrowers can expect to pay .50% in VA loan funding fees on these transactions. This makes sense, especially for VA IRRRLs as the purpose of such loans is to reduce monthly payments and lower interest rates. Charging a higher VA loan funding fee would defeat the purpose for borrowers considering a VA IRRRL to get into a more affordable loan.

Funding Fee Discounts For VA Cash-Out Refinancing Loans?

VA loan funding fees are NOT discounted for any refinancing loan that is based on the equity of the property. You can’t make a down payment on a VA cash-out refinancing loan and get a discounted VA loan funding fee.

VA Loan Funding Fees For Subsequent Use

How much can borrowers expect to pay for second-time use of their VA loan benefit? Whether you’re re doing a new purchase or cash-out refinancing loan, the maximum VA loan funding fee at the time of this writing is 3.3%.

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