Compare your current VA payment to a new IRRRL or cash-out refinance, then check it against VA's statutory 36-month fee recoupment test and rate-drop tests.
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Your refinance break-even is total closing costs divided by monthly savings. VA IRRRLs must recoup fees within 36 months and clear a minimum rate-drop test — at least 0.50% for fixed-to-fixed, 2.00% for ARM-to-fixed — plus 210 days and six payments since your current loan started.
If you'll stay in the home past the break-even month and clear the 36-month recoupment test, the IRRRL pays for itself.
Reviewed by the licensed mortgage team at Simply Approved Mortgages · Last verified August 24, 2026 against the VA Lenders Handbook (M26-7)
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No monthly mortgage insurance is included on either side — VA loans never carry it. The 36-month test applies to lender fees and closing costs, not taxes, insurance, or the funding fee. Estimates only.
VA requires that all fees, closing costs, and expenses financed or paid at closing (other than taxes, insurance and the funding fee) be recouped through lower payments within 36 months. Lenders must certify this at closing — if the math doesn't work, VA won't guarantee the loan.
A fixed-to-fixed IRRRL needs at least a 0.50 percentage-point rate reduction. Refinancing an ARM into a fixed rate needs at least a 2.00 percentage-point reduction, since ARMs can reset higher and the fixed-rate benefit is measured more conservatively.
Cash-out refinances don't use the 36-month or rate-drop tests — VA instead requires a net tangible benefit test and a VA loan comparison disclosure, and most lenders cap LTV at 90% even though VA itself allows up to 100%.
Divide your total closing costs (plus any financed funding fee) by the monthly payment savings. The result is the number of months you must keep the loan before the refinance pays for itself.
For an IRRRL, VA requires that all fees, closing costs, and expenses (except taxes, insurance and the funding fee) be recouped through the lower payment within 36 months. Lenders must certify this at closing — it's a statutory test, not a suggestion.
VA's statutory tests require at least a 0.50 percentage-point rate reduction on a fixed-to-fixed IRRRL, or at least a 2.00 percentage-point reduction when refinancing from an ARM into a fixed rate.
Break-even is lender closing costs divided by the monthly P&I savings, in months. The IRRRL rate-drop test compares your rate reduction to VA's 0.50%/2.00% statutory minimums; the 36-month test compares the break-even month to VA's recoupment limit.
Data year 2026. Program figures last checked against their source on 2026-01-01. Sources: VA Funding Fee, VA Lenders Handbook M26-7. Results are estimates for planning only — not a quote, rate lock, approval, or commitment to lend. Your binding numbers appear on the Loan Estimate and Closing Disclosure.
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SAM is the Simply Approved Mortgages AI assistant, grounded in the VA Lenders Handbook M26-7, 38 CFR Part 36 and the county loan-limit file behind this page. It answers general VA questions. A licensed mortgage loan originator reviews every scenario before any terms are confirmed.
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AI assistant — general VA loan education only, not financial, legal or tax advice, not a loan approval, pre-approval or commitment to lend. Simply Approved Mortgages LLC (NMLS #2620881) is an independent mortgage broker and is not the VA, HUD or any government agency, and is not endorsed by them. All loans are subject to lender underwriting, appraisal and final approval. Equal Housing Opportunity.
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