What is a VA IRRRL?
A VA IRRRL loan is an Interest Rate Reduction Refinance Loan (IRRRL), sometimes called a VA Streamline loan offered by the U.S. Department of Veterans Affairs (VA). When interest rates drop, many Veterans and other homeowners with VA loans consider saving money with a refinance. The fastest refinance option for VA borrowers is a VA IRRRL loan.
If you have an existing VA-backed home loan and want to reduce your monthly mortgage payments—or make your payments more stable—an interest rate reduction refinance loan may be just what you are looking for. Refinancing lets you replace your current loan with a new one, and the word streamline means that since you already have a VA loan, the process is faster and more efficient!
As a homeowner with a current VA loan, you may be eligible for a VA IRRRL if you meet the following requirements:
- You are using the IRRRL to refinance your existing VA-backed home loan.
- You can prove that you currently live in or used to live in the home covered by the loan.
- If you have a second mortgage on the home, and the holder agrees to put your new loan in the first position.
What are the benefits of a VA IRRRL?
When mortgage interest rates drop, you can refinance to a lower rate, lowering your payments and freeing up household income. The VA loan program requires borrowers to pay an upfront VA funding fee that can either be paid at closing, offset with a lender-paid credit, covered by the seller, or rolled into the loan balance. The funding fee on a regular VA loan is between 1.25% – 3.3% of the loan amount, depending on service status, but for a VA Streamline, the funding fee is 0.5% of the loan amount in all circumstances. Finally, suppose you have an adjustable-rate mortgage or variable interest rate (an interest rate that changes over time). In that case, you can refinance into one that is fixed (the same interest rate over the life of the loan), ensuring your payment stays stable.
Recap of options and benefits:
- Refinance to a lower interest rate – this is called a “rate/ term refinance.”
- Refinance to a shorter term to save on interest
- Refinance to a longer term to lower your monthly payments
- Refinance your adjustable-rate mortgage (ARM) to a fixed-rate loan
- Closing costs can be “rolled into” your new loan
How does a VA streamline refinance work?
The word “streamline” means a simplified and less expensive refinance process. When you do a traditional refinance, you follow the same process you went through when you bought the home. That includes a new appraisal, title search, and recording fees. With a streamlined process, there’s often no new appraisal, and the underwriting is less intense. As your lender, we may require a minimum credit score and employment verification, but the VA does not. If you are up to date on your mortgage payments, you should have little challenge getting approved. However, you will need to get a new title search performed and purchase a new title insurance, but the streamlined process moves quickly, and the closing costs can typically be rolled into the new loan.
To be eligible for a VA Streamline Refinance it must provide you with an immediate financial benefit. If you are a veteran, active-duty service member, reservist, National Guard member, or qualifying surviving spouse interested in saving money with a VA IRRRL, contact our experienced loan team today to find out if it makes sense for you.
