If you’re using your VA home loan benefit, one of the most confusing line items is the VA funding fee.
It’s unique to VA loans, and though it’s not “interest,” it can change your monthly payment and total loan cost more than you might think.
This guide breaks down the tiers, exemptions, and payoff impact—and shows you how to model it instantly with our VA Loan Calculator and Mortgage Payment Calculator
1. What Is the VA Funding Fee?
The VA funding fee is a one-time charge that helps keep the VA loan program self-sustaining.
Instead of monthly mortgage insurance like FHA or PMI, VA borrowers pay this upfront fee based on:
Loan type (purchase or refinance)
Down payment size
Usage (first-time or subsequent use)
Military category (active duty, Reserve, or National Guard)
You can pay it upfront at closing or roll it into your loan (financed).
2. 2025 VA Funding Fee Rates (Purchase Loans)
| Down Payment | First Use | Subsequent Use |
|---|---|---|
| None (0%) | 2.15% | 3.30% |
| 5%–9.99% | 1.50% | 1.50% |
| ≥10% | 1.25% | 1.25% |
Example:
$400,000 home, 0% down, first-time use → funding fee = 2.15% × $400,000 = $8,600
You can either:
Pay upfront: bring the $8,600 to closing.
Roll in: finance it into your loan, making your total loan $408,600.
3. How Rolling the Fee Affects Your Payment
Let’s compare:
| Scenario | Loan Amount | Rate | Term | Monthly Payment (P&I) |
|---|---|---|---|---|
| Without fee | $400,000 | 6.5% | 30 yrs | $2,528 |
| With fee financed (2.15%) | $408,600 | 6.5% | 30 yrs | $2,583 |
Difference: +$55/month
Over 30 years, that’s about $19,800 extra paid, mostly in interest on the rolled-in fee.
💡 Tip: If you can afford to pay the funding fee upfront, you’ll save both interest and total loan cost.
4. Who Is Exempt from the Funding Fee
You don’t pay the VA funding fee if you:
Receive VA compensation for a service-connected disability
Are an eligible surviving spouse of a veteran who died in service or from a service-related cause
Are an active-duty Purple Heart recipient (as of 2020 policy update)
Always confirm your Certificate of Eligibility (COE) before closing to ensure your lender applies the exemption.
5. Funding Fee on VA Refinances
VA loans come in two main refinance forms:
| Type | Description | Funding Fee |
|---|---|---|
| IRRRL (Interest Rate Reduction Refinance Loan) | Streamlined refi for existing VA loans | 0.5% |
| Cash-Out Refinance | Access home equity with a new VA loan | 2.15% (first use) or 3.30% (subsequent use) |
Rolling fees into a refinance has a compounding effect—especially if you’ve already rolled it once before.
Use our Mortgage Payment Calculator to test payment differences before deciding.
6. How Down Payment Reduces the Fee
Even a small down payment (5%–10%) can cut the funding fee by one-third or more.
| Down Payment | Fee | Savings vs 0% |
|---|---|---|
| 0% | 2.15% | — |
| 5% | 1.50% | ≈ $2,600 saved on a $400k home |
| 10% | 1.25% | ≈ $3,600 saved |
7. Funding Fee vs. Private Mortgage Insurance (PMI)
| Feature | VA Funding Fee | PMI (Conventional) |
|---|---|---|
| Payment Type | One-time | Monthly |
| Can Be Financed | Yes | N/A |
| Can Be Waived | For disabled vets & survivors | With ≥20% down |
| Tax-Deductible | Sometimes (ask CPA) | Sometimes |
8. Funding Fee Refunds & Reuse Rules
If you were charged a fee but later awarded VA disability compensation retroactively to the loan date, you can request a refund through your lender or VA regional office.
For reuse, the fee resets per loan, but if you sell and fully repay your VA loan, your full entitlement restores—allowing a lower “first-use” rate again.
9. Modeling Scenarios in a Calculator
To visualize real impact:
Go to VA Loan Calculator
Enter your purchase price and down payment.
Add “Funding Fee: 2.15%” and toggle between “Financed” vs “Upfront.”
Note how total loan amount, payment, and lifetime interest change.
10. Key Takeaways
The VA funding fee replaces monthly mortgage insurance—paid once, upfront or financed.
It usually ranges 1.25–3.3%, depending on use and down payment.
Paying it upfront saves long-term interest.
Certain veterans and surviving spouses are exempt.
Model both scenarios to see your true payment difference.
FAQ
Can I roll the VA funding fee into my loan?
Yes, you can finance it, but it increases your monthly payment and total interest paid.Is the funding fee refundable?
If you later receive VA disability compensation retroactive to your closing date, you may qualify for a full refund.Do surviving spouses pay the funding fee?
No—eligible surviving spouses are exempt from paying it.Does the funding fee affect my monthly payment?
Only if you finance it into your loan amount. Paying upfront keeps your monthly lower.