A mortgage refinance is the process of replacing a loan on a property with a new loan. Refinancing can mean a lower interest rate, lower monthly payment, or even a shorter term. It may also provide cash out of equity to consolidate debt, make a major home improvement, or pay for important family expenses.

Getting approved for a VA refinance loan involves documenting your income and credit qualifications – similar to what you would do to obtain a purchase loan. Your lender must see that you can afford the payments on your new loan along with your other obligations, while still having enough money left over. Expect your lender to pull your credit, and be prepared to locate pay stubs, tax returns, and other income documents.

There are two VA refinance programs: streamline and cash-out. The streamline refinance, also referred to as the Interest Rate Reduction Refinance Loan (IRRRL), can be used by qualified VA loan holders who want a lower rate and payment, or who want to switch an adjustable rate to a fixed one. A VA cash-out loan can be used to refinance either a VA or non-VA loan, and can help qualified borrowers consolidate debt or get cash out of a home’s equity to pay important expenses.

If you have a VA loan that is up to date with payments and you want lower or more stable monthly payments, a streamline (IRRRL) may be possible. If you wish to take cash out of equity to pay for important expenses like a home improvement or paying off debt, then a streamline cannot be used.