Eligible veterans have a choice when refinancing: use their VA benefit or go conventional. In most cases, the VA refinance wins — but there are scenarios where conventional makes more sense. Here is the honest comparison. Contact MaxVALoan for a side-by-side analysis of your specific loan.
What It Means
A conventional refinance replaces your existing loan with a new loan not backed by a government program. A VA refinance uses the VA guarantee to access lower rates and more favorable terms. Veterans who currently have a conventional loan can refinance into a VA loan (Cash-Out option) or — if already in a VA loan — use the IRRRL Streamline. The decision comes down to rate, costs, equity, and long-term plans.
Requirements
| Factor | VA Refinance | Conventional Refinance |
|---|---|---|
| Interest Rate | 0.25–0.50% lower typically | Higher for same profile |
| Monthly MIP/PMI | None ever | Required if <20% equity |
| Upfront Fee | VA Funding Fee (waived w/ disability) | No funding fee |
| Appraisal (IRRRL) | Usually not required | Always required |
| Qualification | VA eligible only | Anyone |
| Rental property eligible | IRRRL: Yes (prior occupancy) | Yes |
Examples
VA wins — current conventional loan: Veteran has 6% conventional loan with $250/month PMI (only 12% equity). Refinances into VA Cash-Out at 6.375% — saves $250/month PMI instantly + lower rate = $380/month savings. Break-even: 14 months.
Conventional wins — high-equity, short timeline: Veteran has a VA loan at 4.5% (from 2021) and wants to remove a co-borrower. He has 35% equity. Conventional refinance has no VA funding fee (saving $7,000) and he plans to sell in 3 years anyway. Conventional wins here on total cost.
Tips
- If you have a conventional loan and less than 20% equity, converting to a VA loan almost always wins — you eliminate PMI and potentially get a lower rate
- If you have a VA loan at a rate above current market (e.g., 7%+ taken in 2023), use the IRRRL — fastest and cheapest refinance option available
- See our VA refinance eligibility guide to confirm your qualification before deciding
Frequently Asked Questions
Q: Can I refinance from VA to conventional to remove the VA loan?
A: Yes — this is done for reasons like removing a co-borrower, no longer wanting the VA loan obligation, or gaining more flexibility. However, you lose the VA rate advantage and cannot easily return to VA without a new purchase or Cash-Out refinance. Discuss with us before making this decision.
Q: Does refinancing from VA to conventional restore my VA entitlement?
A: Yes — once you refinance out of a VA loan, you can request entitlement restoration. See our entitlement restoration guide.
