- Refinancing from an FHA to a VA loan can save on mortgage insurance premiums and may lower your interest rate.
- The VA funding fee and closing costs are factors to consider, and you’ll need a new appraisal.
- Refinancing may affect your VA loan entitlement for future use.
Are you thinking about refinancing your current FHA loan to a VA loan? It can be a money-saving move for most borrowers, but that’s not always the case. We’ll cover everything you need to know — the good and the bad — about doing an FHA to VA loan refinance.
What Is an FHA to VA Loan Refinance?
An FHA to VA loan refinance is when a homeowner replaces their existing FHA mortgage with a loan secured by the U.S. Department of Veterans Affairs.
Not everyone will qualify for a VA refinance loan. In most cases, you must be either a current service member or an honorably discharged veteran. However, refinancing into a VA loan could be a wise decision if you’re able to do so.
Why Refinance Your FHA Loan Into a VA Loan?
The federal government backs both FHA and VA loans. However, there are numerous differences between these two programs. In many cases, VA loans can offer advantages over their FHA alternatives:
- Lower interest rates
- No monthly mortgage insurance premiums
- You can turn home equity into cash
Stop Paying the FHA Mortgage Insurance Premium
Almost all FHA loans come with a monthly mortgage insurance premium (MIP). Since March 2023, the annual cost of mortgage insurance has been 0.55% of the loan amount per year, with the total divided evenly among your monthly payments.
That’s nearly $140 per month on a $300,000 FHA loan. If you took out your FHA mortgage before the March 2023 reduction, there’s a good chance you’re paying a higher annual MIP of 0.85% — over $210 per month.
This premium is an ongoing expense regardless of how much equity you have in your home, and in most cases it lasts for the life of your mortgage. VA loans have no monthly mortgage insurance requirement.
VA Rates Are Typically Lower than FHA
Most borrowers will receive a lower interest rate on a VA loan than on a comparable FHA mortgage.
Here’s a quick look at how VA interest rates are trending compared to FHA rates:
Average market rates for April 17, 2026 are 5.76% for 30-year fixed VA purchase and 5.65% for 30-year fixed FHA purchase How we source rates and rate trends
Rates based on market averages as of Apr 16, 2026.Product Rate APR 30-year Fixed Va Purchase 5.76% 5.90% 30-year Fixed Fha Purchase 5.65% 6.86%
VA loan rates are typically lower because the VA reduces lender risk by guaranteeing 25% of the mortgage in the event of default. That said, many factors influence the rate a lender quotes you, and some homeowners may still find better value with an FHA refinance.
You Can Cash Out Built-Up Equity With a VA Refinance
If you have built-up equity in your home, there’s a good chance you can convert some of it to cash as part of your FHA to VA loan refinance. Most VA lenders will allow you to borrow up to 90% of your home’s value, and some may go up to 100%.
For example, if you owe $220,000 on a $300,000 home, you may be eligible to take $50,000 in cash at closing, less closing costs ($300k × 90% = $270k − $220k loan balance = $50k).
Buying a Home With the Intention to Refinance VA Later
For some property owners, taking out an FHA loan to buy their home and refinancing through the VA later may have been the plan all along.
VA mortgages have fewer fixed guidelines than many other loan types, meaning each lender sets its own minimum borrower criteria — which are often more restrictive than FHA requirements.
For borrowers with a lower credit score or higher level of existing debt, it might make sense to purchase with a 3.5% down FHA loan and then refinance into a VA loan once their financial situation improves. That said, borrowers who are eligible for both programs will generally be better off going VA from the start.
4 Drawbacks of Refinancing From an FHA to a VA Mortgage
Despite having several advantages over FHA loans, there are some real drawbacks to consider when refinancing into a VA mortgage:
- VA Funding Fee
- Closing Costs
- Cash-Out Refinance Requirement
- New Appraisal Requirement
1. VA Funding Fee for Refinances
VA loans do not require mortgage insurance like FHA loans do. However, there is an upfront VA funding fee, typically 2.15% of the new loan amount.
Repeat VA borrowers face a funding fee of 3.3%. Homeowners with a service-connected disability may be able to waive this cost entirely.
While the funding fee adds a notable expense, keep in mind that refinancing with another FHA loan would also incur an upfront mortgage insurance premium (UFMIP) of 1.75% — nearly as much as the VA upfront fee.
2. Closing Costs on a VA Refinance
In addition to the funding fee, total closing costs on an FHA to VA loan refinance often run 3% to 5% of the amount borrowed — sometimes higher.
It may be possible to roll closing costs into your loan, though this means paying long-term interest on the added balance. Some VA lenders may also offer lender credits to cover expenses in exchange for a marginally higher interest rate.
3. Cash-Out Refinance Is Your Only VA Option
The VA only offers two refinance programs: the interest rate reduction refinance loan (IRRRL), which is limited to existing VA loan holders, and the cash-out refinance.
To replace your existing FHA loan with a VA loan, you would need to use the cash-out refinance option. While VA loans are known for lower rates, cash-out refinances are considered riskier and typically carry higher interest costs than a simple rate-and-term refinance.
Note: You can also tap into equity using an FHA cash-out refinance.
4. You Need an Appraisal; Home Needs to Meet VA Standards
Refinancing into a VA mortgage requires a new appraisal. Sometimes a home that initially qualified for FHA financing can be ineligible under VA guidelines. The standards are similar, but appraisers do look for different things — and issues may have arisen since you purchased the home that could prevent you from qualifying now.
Homeowners with an existing FHA mortgage who have trouble meeting VA property standards should consider the FHA Streamline refinance program, which does not require an appraisal.
Refinancing and the Impact on VA Entitlement
If you qualify for a Certificate of Eligibility (COE) from the Department of Veterans Affairs and have never taken out a VA loan, you likely have “full entitlement.” This means the VA is willing to insure your mortgage regardless of the loan size.
With most lenders, having full entitlement allows you to purchase a home with zero money down or convert an FHA loan to a VA loan.
Once you’ve taken out a loan using your full entitlement, however, you can’t get it back until you sell the home and pay off the loan, or have your mortgage assumed by an eligible service member or veteran. Simply paying off the loan or refinancing to a conventional loan does not restore your entitlement.
The VA does offer a one-time restoration of entitlement for buyers who have refinanced or paid off their VA loan but still own the home. This allows you to purchase or refinance another home with full entitlement — though the only way to restore entitlement again in the future would be to sell all associated properties.
If your VA entitlement is tied up on another home but the VA loan is paid off, you can request the one-time restoration using VA Form 26-1880 to complete the FHA-to-VA refinance.
Is It Worth Refinancing My FHA Loan to a VA Loan?
Probably — but the answer largely depends on your plans for the future. Here are the key questions to ask yourself:
How Long Will You Keep the Home?
Even if you’re expecting significant monthly savings, it may take time to reach the break-even point where your savings exceed the closing costs of the new loan. If you plan to sell or refinance again before then, keeping your current mortgage likely makes more sense.
Will You Convert the Home to a Rental?
An FHA to VA loan refinance requires you to certify that you plan to continue using the property as your primary residence for at least 12 months. If you intend to turn it into a rental down the line, doing so would tie up your VA entitlement and potentially limit your ability to use it for future home purchases.
Do You Need Your VA Entitlement for a Future Home Purchase?
If there’s a chance you’ll want to use your VA entitlement to buy another home before selling this one, it may make more sense to stick with the FHA loan and preserve your entitlement for later.
Do You Plan to Own and Live In the Home for the Foreseeable Future?
If you anticipate living in the home long-term with no plans to buy another property before selling, refinancing from an FHA loan to a VA loan could produce significant savings over the life of the mortgage.
Note: As a consumer protection measure, VA guidelines cap the break-even point for refinance loans at 36 months. Loans that would take longer to recoup your expenses cannot be approved.
Can An FHA to VA Loan Refinance Save You Money?
VA loan rates are typically lower than FHA rates, but not every homeowner will come out ahead by refinancing. Those who plan to sell in the next few years may be unable to recoup their closing costs. And borrowers who plan to eventually turn their home into a rental may not want to tie up their VA entitlement, even if the monthly savings look appealing.
Ready to find out what you could save? Start your refinance with Refi.com today and see what an FHA to VA loan refinance could mean for your monthly payment.
