Legislation that would nearly triple the funding fee on VA streamline refinances cleared the House on Veterans Day, reviving a proposal that drew objections from the mortgage industry earlier this year.
The Take Care of America's Veterans Act, passed Wednesday, Nov. 11, would increase the funding fee on VA Interest Rate Reduction Refinance Loans (IRRRLs) from 0.5% to 1.42%. It would also double the fee for assuming an existing VA-backed mortgage from 0.5% to 1%.
For a veteran refinancing a $350,000 mortgage, the IRRRL funding fee would rise from $1,750 to $4,970, an additional $3,220 that could be paid upfront or financed into the loan.
That increase could change the economics of a refinance, particularly for borrowers whose potential monthly savings are relatively modest. Financing the fee would also increase the loan balance and interest paid over time.
The legislation still requires Senate approval and the president's signature. Current VA funding fees remain unchanged.
Higher Mortgage Fees Help Finance Veterans Benefits
The fee increases are part of a broader package expanding benefits and services for veterans, including additional disability compensation, survivor benefits, and health care provisions.
A March analysis by the Congressional Budget Office estimated that extending existing VA funding fee rates and increasing fees on streamline refinances and loan assumptions would reduce federal net direct spending by approximately $4 billion between 2026 and 2036.
The savings would come from lowering the federal government's cost of guaranteeing VA mortgages through higher fees collected from borrowers.
That $4 billion estimate covers the mortgage fee provisions in the earlier legislation, rather than the entire veterans benefits package passed Wednesday.
The proposal would also extend current funding fee rates on VA purchase and cash-out refinance loans through September 2036. Under existing law, those rates are scheduled to decline after June 8, 2034.
Mortgage Industry Raised Affordability Concerns
The Mortgage Bankers Association opposed the fee increases when they were considered earlier this year.
In a Feb. 12 letter to House Veterans' Affairs Committee leaders, the association supported expanding benefits for disabled veterans and survivors but objected to financing those changes through higher mortgage charges.
"Homeownership is a foundational component of long-term financial stability — and it should not continue to be treated as a primary source of revenue to enable policy changes outside of the home loan program," wrote Bill Killmer, MBA's senior vice president of legislative and political affairs.
The association warned that higher fees could make VA financing less affordable, particularly for borrowers with modest incomes.
The proposed IRRRL increase would add another consideration to refinance savings calculations. A borrower who stands to save $150 a month, for example, would face an additional $3,220 funding fee on a $350,000 loan. That added cost alone is equivalent to more than 21 months of the projected savings, before accounting for financing costs or other loan expenses.
The higher assumption fee could also reduce some of the financial advantage of taking over an existing VA mortgage with a below-market interest rate.
Not All VA Borrowers Would Pay More
Veterans exempt from VA funding fees would remain exempt under the proposal.
Under current VA rules, exemptions include borrowers receiving VA compensation for service-connected disabilities, certain surviving spouses, and eligible active-duty Purple Heart recipients.
The bill also includes a provision expanding VA home loan eligibility for certain National Guard and Reserve members. Some borrowers qualifying under the new eligibility provision would face an additional one-percentage-point funding fee.
The changes would therefore expand access to VA-backed financing for some service members while increasing borrowing costs for others.
Bill Lists October 1 Effective Date
The legislation specifies Oct. 1, 2026, as the effective date for the higher refinance and assumption fees, although the House did not pass the measure until Nov. 11.
If the provision survives Senate consideration, the VA may need to clarify how the new fees would apply to loans closed before enactment. Congress could also revise the date before the bill becomes law.
The proposed increases are not yet law. The measure still requires Senate approval and the president's signature.
