Can I Restore My VA Entitlement?

A VA loan gives you a way to buy a house with 0% down, lower-than-average interest rates, and no mortgage insurance. It’s no surprise that veterans and active-duty military members want to take advantage of it. 

That starts with initially helping you get into a house. But the benefits of a VA loan don’t have to stop there. You can potentially restore your VA entitlement, and that means you can buy a house with a VA loan more than once. So whether you want to upgrade, downsize, or relocate, the perks of this kind of a mortgage are still on the table.

Ways to restore your VA loan entitlement

Your VA entitlement is the amount of money the VA will pay your mortgage lender if you don’t repay your loan. That lowers risk, so this chunk of money is what makes it possible to get a loan with 0% down and competitive interest rates. 

Having full entitlement means you have full access to VA loan benefits, like zero down payment requirement. (You can get another VA loan without full entitlement, but you might need to put money down.)

If you want to fully restore your VA loan entitlement, you have a few options:

#1: Pay off the loan and sell the house

This is your most straightforward option. If you fully pay off your original VA loan and you sell the house, you can request a full entitlement restoration from the VA. 

This doesn’t mean you’re locked in for 30 years as you slowly move toward paying off your loan. You can accomplish the payoff portion with the sale of your house. So if you list your house for enough money to cover what’s left on your VA loan, you can go this route.

Once the sale closes, your closing agent works with your mortgage company to get the payoff amount. Then, using the proceeds from your sale, they hand over the money to zero out your loan balance. You get to pocket whatever’s left, minus any closing costs. 

#2: You pay off the VA loan but keep the house

Maybe you want to hang onto the current house while buying a new primary residence. You might plan to rent it out or use it as a vacation home. Maybe you’re trying to keep it in your portfolio for future generations to use. 

Whatever the case may be, you have the option to keep the house while restoring your full VA entitlement. But there is a catch: you can only do this once. 

The VA allows for a one-time entitlement restoration. To be eligible for this, you need to fully pay off the existing VA loan. You can do that the old-fashioned way, by making your mortgage payments for the length of your loan term, or slightly differently. The VA says you can refinance the VA loan into a non-VA loan, then apply for your one-time restoration. Because the new non-VA mortgage you refinanced into pays off your VA loan balance, you can get restoration this way. 

#3: Sell the house and have the buyer take over your VA loan

This option only works if you’re selling your house to someone who’s also eligible for a VA loan themselves. If your buyer is a qualifying veteran or active-duty military member, they can assume your VA loan. And if they have enough entitlement available, they can substitute their entitlement for yours, freeing it up. 

The key here is that you need both pieces. When the buyer assumes your VA loan, it releases you from liability (meaning if they stop repaying, you’re not on the hook). But it doesn’t release your entitlement. That stays tied up with the house unless the buyer substitutes their entitlement for yours. 

For this to work, the buyer needs to have at least as much available entitlement as the amount of entitlement you originally used. If you used $36,000 of entitlement but they only have $33,000 available, for example, they don’t have enough to substitute here. 

But a first-time buyer or someone who sold their house and paid off the VA loan should have enough entitlement. That means they can both assume your VA loan and substitute their entitlement for yours. That restores your entitlement so you can buy another house with a VA loan.

Getting the paperwork to prove your restored entitlement

It would be great if going through one of the above options automatically restored your entitlement. But it doesn’t. You need to request restoration from the VA and get an updated COE.

A few years ago, the VA made it possible to request VA loan restoration online. After you sign into the VA’s COE portal, you can complete your restoration request digitally.

If you prefer to do things with a hard copy, you can also mail in your request for restoration. If you want to go this route, you’ll use VA Form 26-1880. Complete that and mail it back to your regional loan center. The last page of the form has the addresses listed so you can find the right one to use. 

Alternatively, if you’re working with a VA lender to buy the new house with a VA loan, they can likely request restoration on your behalf. 

If you want to find a lender who can help you navigate all of this, we have a table showcasing current rates from a variety of VA lenders. Checking out your options can help you find the right partner to help you restore your VA loan entitlement and buy your next house.

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