Removing mortgage insurance
VA loans have no monthly mortgage insurance.
Type I cash-out
A refinance with no cash out still counts as a VA cash-out (Type I).
Why some veterans refinance non-VA loans into VA loans.
Costs
Funding fee unless exempt, appraisal and closing costs.
Entitlement
Confirm available entitlement on your COE.
Why veterans convert
Moving an FHA or conventional loan into a VA loan can end monthly mortgage insurance, because VA loans do not charge it. VA instead charges a one-time funding fee unless you are exempt, which can be financed.
Type I cash-out
When the new VA loan is no larger than the payoff of the old loan, VA calls it a Type I cash-out. It still requires a VA appraisal, a Certificate of Eligibility and current occupancy, but it lets you switch programs without taking cash.
Recoupment
For Type I cash-outs, VA requires that fees and closing costs be recouped within 36 months through lower monthly payments, and the lender must show a net tangible benefit.
Costs to compare
Compare the funding fee and closing costs against the mortgage insurance you would stop paying and the remaining time it would have lasted. If your conventional PMI is about to end anyway, converting may not pay off.
Entitlement
Using a VA loan ties up entitlement, which matters if you expect to buy another home with a VA loan while keeping this one.
Get a comparison
Ask for a Loan Estimate and VA's required comparison showing the old and new loans side by side.
General education only; confirm current rules with official sources and a licensed lender.
Sources
Sources checked 10/23/2026.