Quick Answer: Yes — you can refinance a VA loan into a conventional mortgage at any time. The process is a standard conventional rate-and-term or cash-out refinance: full appraisal, income verification, and credit review required. Common reasons include converting a home to a rental property, removing a co-borrower, or freeing up VA entitlement for a new purchase. The trade-offs are real: you'll likely pay PMI if your equity is under 20%, and you'll lose the VA's rate advantage and backing. Importantly, refinancing out of a VA loan does not forfeit your VA benefit — your entitlement can be restored once the loan is paid off — but you need to request an updated COE for the restoration to take effect.
Yes, You Can Exit a VA Loan
Most content about VA loans focuses on getting into them. But veterans sometimes have legitimate reasons to refinance out of a VA loan into a conventional mortgage — and understanding when that makes sense, and what it costs, is worth knowing.
The short answer: it's a standard conventional refinance. No special VA process, no VA approval required. You apply with a conventional lender, go through full underwriting, and pay off your existing VA loan at closing. The VA is no longer involved after that point.
What you give up, and what you gain, depends heavily on your situation.
When Refinancing Out of a VA Loan Makes Sense
There are three scenarios where trading a VA loan for a conventional mortgage is genuinely worth considering.
1. Converting the Property to a Rental
VA loans require owner occupancy. When you originate a VA loan, you certify your intent to live in the home as your primary residence. Once you've done that and lived there, the VA's rules become more flexible — veterans who move out can often still use the VA IRRRL on a former primary residence. But not all lenders will refinance a non-owner-occupied property under a VA loan.
Conventional investment property loans have no ongoing occupancy requirement. If you want to convert your home to a full investment property, buy another home without the complication of VA occupancy rules, and simplify your lending situation, a conventional refinance removes the ambiguity. You'll be subject to standard investment property underwriting (often requiring 20–25% equity and a slightly higher rate), but the property classification is clean.
2. Removing a Co-Borrower After Divorce or Separation
VA loans can be complicated to modify after a divorce. If your ex-spouse is a co-borrower on your VA loan, removing them typically requires refinancing — and a VA refinance requires that at least one borrower on the new loan be the veteran whose entitlement was used. If the non-veteran spouse is keeping the home, or if the divorce decree assigns the property to the non-veteran, a conventional refinance may be the cleaner path.
In this scenario, the veteran who originally used their entitlement refinances out of the VA loan entirely. The property transfers to conventional financing, the non-veteran co-borrower can be removed, and the veteran's VA entitlement becomes eligible for restoration once the VA loan is paid off.
3. Freeing Up VA Entitlement for a New Purchase
Every active VA loan ties up a portion of the veteran's entitlement. If you want to buy a new home using a VA loan and your entitlement is already in use on an existing property, you have a few options: sell the first property, use remaining entitlement (if sufficient), or refinance the existing VA loan into a conventional mortgage to release the entitlement.
Refinancing to conventional specifically to free up entitlement is a valid strategy when you want to keep the first property — as a rental, for example — and still access VA benefits for a new primary residence. Once the conventional refinance closes and the VA loan is paid off, your entitlement becomes eligible for restoration through a COE update. See VA loan entitlement restoration explained for the full process.
This strategy has real costs (covered below), so it only makes sense when the benefit of a new VA purchase outweighs what you're giving up on the existing loan.
What You Give Up
Refinancing out of a VA loan means leaving behind several meaningful advantages.
The VA rate advantage. VA loans consistently carry lower interest rates than conventional loans — typically 0.25%–0.75% lower for comparable borrowers, due to the VA guaranty reducing lender risk. When you refinance into a conventional loan, your rate will reflect conventional market pricing. Depending on your credit profile and equity position, that could mean a noticeably higher rate.
No PMI on VA loans. VA loans never require private mortgage insurance. Conventional loans generally require PMI if your equity is below 20% at origination. PMI typically runs 0.5%–1.5% of the loan amount annually. On a $300,000 loan, that's $1,500–$4,500 per year added to your cost — and it persists until you reach 20% equity.
If you have 20% or more equity at the time you refinance, you can avoid PMI on the conventional loan. If you don't, the PMI cost alone may make the conventional refinance significantly more expensive than staying in the VA loan, even after accounting for other factors.
The VA guaranty. VA-backed loans carry a government guaranty that provides certain protections and favorable terms for veterans. Once you're in a conventional loan, those protections are gone.
The Process: What to Expect
Refinancing a VA loan to conventional follows the same path as any conventional refinance:
Credit review. Conventional lenders will pull your credit report and evaluate your score. Most conventional lenders require a minimum 620–640 score; the best rates require 740+.
Income documentation. Full income verification is required — W-2s, tax returns, pay stubs, and proof of employment. This is standard conventional underwriting, unlike the VA IRRRL which typically waives income documentation.
Appraisal. A full appraisal is required to establish your home's current market value. This determines your loan-to-value ratio, which affects both your rate and whether PMI applies.
Closing costs. Standard conventional closing costs apply: origination fees, title insurance, appraisal, and recording fees. The VA funding fee does not apply to a conventional loan — but the absence of the funding fee doesn't mean the transaction is cheap. Conventional closing costs typically run 2–3% of the loan amount.
No VA payoff penalty. VA loans have no prepayment penalty. Paying off your VA loan through a refinance carries no additional cost beyond the standard transaction fees.
What Happens to Your VA Benefit
This is a common source of confusion: refinancing out of a VA loan does not forfeit your VA home loan benefit.
Your VA eligibility — based on your service record — never goes away. What changes is the entitlement tied to a specific loan. When you refinance your VA loan into a conventional mortgage and the VA loan is paid off, your entitlement becomes eligible for restoration. You submit an updated COE request (through your lender or directly through VA.gov), and the VA updates your record to reflect that the prior loan has been satisfied.
Once restored, your entitlement is available for a future VA loan — whether that's a purchase or a cash-out refinance on a different property.
The restoration is not automatic. You need to request the updated COE after the VA loan payoff is recorded. But it is routine, and lenders who work with VA borrowers regularly handle this process without difficulty.
For the full mechanics of how entitlement restoration works, including one-time restoration and simultaneous VA loans, see our guide on VA loan entitlement restoration.
Comparing This to the Alternative: Keeping the VA Loan
Before committing to a conventional refinance, it's worth asking whether the goal can be achieved while staying in the VA loan.
If the goal is a lower rate, the VA IRRRL is almost certainly the better path — it's faster, cheaper, requires less documentation, and keeps the VA rate advantage. Our VA IRRRL vs conventional refinance comparison covers the trade-offs in detail.
If the goal is accessing equity, the VA Cash-Out Refinance typically offers better terms than a conventional cash-out — lower rate, no PMI, and up to 90% LTV at most lenders.
If the goal is removing a co-borrower or converting to investment property, a conventional refinance may genuinely be the cleaner path, even at a higher rate — because the VA loan structure creates complications that are difficult to resolve otherwise.
The Reverse Transaction: Conventional to VA
If you currently have a conventional loan and want to move into a VA loan — the opposite of this post's topic — the mechanism is a VA Cash-Out Refinance. You pay off the conventional loan and originate a new VA-backed mortgage. The benefits typically include no PMI, a lower rate, and access to up to 90% LTV.
Our guide on refinancing a conventional loan into a VA loan covers that process step by step.
Bottom Line
Refinancing a VA loan into a conventional mortgage is straightforward — it's a standard conventional refinance with no special VA procedures. The reasons that typically justify it are specific: converting to a rental, navigating a co-borrower removal, or strategically freeing up entitlement for a new VA purchase.
In most other cases — rate reduction, accessing equity, general refinancing — staying in the VA loan and using the IRRRL or VA Cash-Out produces better terms. The VA loan's rate advantage and zero-PMI structure are difficult to replicate with conventional financing.
If you're considering this move, run the full cost comparison: conventional rate plus PMI (if applicable) versus your current VA loan costs, factoring in how long you plan to hold the property. The trade-off only makes sense when the specific goal can't be achieved within the VA loan framework.
Want to learn more about your VA loan options?
Explore our in-depth guides on VA refinancing programs to understand your eligibility and potential savings.