Veterans who refinance their homes through a VA-backed loan could face significantly higher fees under a proposal in Congress that would use changes to the home-loan program to fund a broader package of veterans benefits.
The provision is Section 104(b) of the Take Care of America’s Veterans Act, H.R. 9237. It carries forward the home-loan fee changes developed in the standalone Sharri Briley and Eric Edmundson Veterans Benefits Expansion Act, H.R. 6047, before that legislation was incorporated into the broader package.
The proposal would sharply increase two specified VA home-loan fees. The funding fee for Interest Rate Reduction Refinance Loans, or IRRRLs, would nearly triple from 0.50% to 1.42%, while the fee for assuming an existing VA-backed loan would double from 0.50% to 1%
For Air Force veteran Amy Murphy, who wants to refinance a $400,000 VA-backed mortgage solely to secure a lower interest rate and monthly payment, the proposed change would mean $3,680 more in funding fees. At the current rate, her fee would be $2,000. At the proposed rate, it would be $5,680.
“The point of the IRRRL is to make it easier for me to take advantage of a lower interest rate. But under the proposed fee structure, I have to save enough through the lower rate to overcome a substantially larger upfront cost.”
VA exempts certain borrowers from the funding fee, including veterans receiving VA disability compensation; some veterans entitled to compensation but receiving retirement or active-duty pay instead; certain borrowers with qualifying pre-discharge disability ratings; and active-duty service members who have received a Purple Heart. Active-duty status alone does not qualify a borrower for an exemption.
The number of IRRRL borrowers who would be subject to the higher fee is not clear from publicly available VA data. VA reported 119,457 IRRRLs in 2025, a 135% increase from 50,825 in 2024. VA’s loan-volume reports do not publicly identify how many of those borrowers paid the funding fee or how many were active-duty service members.
For borrowers who do pay the fee, VA allows the cost to be financed into the new loan. That avoids an upfront payment but increases the loan balance and means the borrower pays interest on the financed fee.
Marcia Black, a VA loan officer with M&T Bank, said higher fees could discourage veterans from refinancing when interest rates fall.
“Higher fees deter veterans from refinancing when market interest rates drop, trapping them in higher-rate loans,” Black said. “Targeting refinances disproportionately harms active-duty military and veterans trying to lower monthly payments during high-cost cycles.”
The Mortgage Bankers Association said it could not support H.R. 6047 as drafted because of the proposed funding-fee increases. MBA urged Congress to remove or substantially modify the proposed fee increases and the extension of higher VA home-loan fee rates.
The IRRRL is designed to streamline refinancing for existing VA borrowers, generally to obtain a lower interest rate or reduce the monthly payment.
In TCAVA’s proposed legislation of more than 60 veteran bills, the VA home-loan fee provisions serve as budgetary offsets.
In its March estimate of the standalone H.R. 6047, the Congressional Budget Office estimated that the bill’s home-loan fee provisions would reduce net direct spending by about $4 billion from 2026 through 2036 by lowering the subsidy cost of VA loan guarantees. CBO estimated the overall H.R. 6047 package would reduce net direct spending by $42 million over that period.
For veteran borrower Mitchell Duffy, who has used VA-backed financing on multiple properties, the potential impact could accumulate across several loans.
Duffy owns four properties he now rents out that were financed with VA-backed loans and has about $1.15 million in combined mortgage debt. If the full $1.15 million were refinanced and each loan were subject to the proposed fee, the 0.92-percentage-point increase would amount to about $10,580 in additional funding fees. The actual amount would depend on the outstanding balance and eligibility of each loan when refinanced.
Section 104(b) does not establish a new IRRRL fee based on whether a veteran is using the VA home-loan benefit for a second or third time.
The House has not passed H.R. 9237. On July 16, a motion to recommit the bill failed 210-211, after which further consideration was postponed. The proposed fee changes have not yet become law.
“I don’t necessarily have an extra $3,680 sitting in the bank,” said Murphy. “So, if this legislation gets passed, I have a decision to make: is the lower interest rate still worth refinancing, or will the higher VA fee make the savings less worth it?”
Natalie Oliverio is an independent journalist and Navy veteran who covers military and veterans’ issues. Drawing on her experience as a talent executive and mentor, she writes about the policies, people and programs shaping the military community.
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