IRRRL – Interest Rate Reduction Refinance Loan [LOW-INTEREST RATES]
Qualified VA borrowers have access to one of the most straightforward and powerful refinance options around: the VA IRRRL, also known as a VA streamline refinance.
VA Streamline refinances loans are relatively easy and can be completed quickly, due to the fact that homeowners are refinancing from one VA Loan product to another.
What is a VA IRRRL (Streamline Refinance)?
A VA IRRRL is a mortgage refinance option for Veterans with an existing VA loan. The IRRRL allows homeowners to refinance an existing VA loan to a new VA loan with a lower interest rate or convert a VA loan from an adjustable to fixed-rate.
It’s often called a VA streamline because it generally requires less paperwork and is faster than a typical refinance.
VA IRRRL Rates
The typical reason many Veterans refinance is to lower their current mortgage’s interest rate. IRRRL rates may vary from home purchase rates. Below are today’s VA IRRRL rates.
Current VA IRRRL Rates
VA IRRRL rates change daily based on market conditions. The following IRRRL rates are current as of Sep 19th, 06:02 PM CST
|VA Loan Type||Interest Rate||APR|
|30-Year VA IRRRL Streamline||2.750%||2.913%|
|15-Year VA IRRRL Streamline||2.250%||2.495%|
|30-Year VA IRRRL Streamline Jumbo||2.750%||2.922%|
View Rate Assumptions
When refinancing, the difference in rate or terms must be enough to give you a real benefit, such as monthly payment savings or a fixed rate rather than an interest level that adjusts.
Every VA refinance situation is different. Talk through your specific situation with a loan officer who can run the numbers and help you gauge what makes the best financial sense.
VA Streamline Refinancing Benefits
With an IRRRL, there are several prominent advantages, including little to no out-of-pocket costs and no VA appraisal in most instances.
To avoid out-of-pocket costs, homeowners can choose to roll the closing costs and fees into the loan balance.
Today’s interest rates are at competitive levels. With a reduction of just a half of a percent, a borrower could potentially generate tens of thousands in savings over the life of a loan.
Let’s look at a quick example using the same loan terms (30-years, fixed-rate) with three different interest rates.
|Example||Monthly Estimated Principle & Interest Payment||Total Estimated Interest Paid Over 30 Years|
|$250,000 loan at 5.5 percent interest rate||$1,419||$261,010|
|$250,000 loan at 5 percent interest rate||$1,342||$233,139|
|$250,000 loan at 4.5 percent interest rate||$1,266||$206,017|
Savings and interest rates shown here are for illustrative purposes only and may change based on a variety of factors. All loans require approval and proof of eligibility and are subject to the complete terms and conditions outlined in the loan agreement documents.
Want to see what you could save with a VA refinance? Estimate your savings and monthly payments with our VA loan refinance calculator.
VA Streamline IRRRL Requirements
You may be eligible for a VA IRRRL if you financed the property with a VA loan and can certify you live or previously lived in the home.
The IRRRL is not available to Veterans with non-VA loans. Veterans with non-VA loans wishing to refinance to a VA loan can look to the VA cash-out refinance option.
Lenders may also have guidelines and requirements regarding how long you’ve had your current mortgage, how many payments you’ve made and how long it will take to recoup the costs and fees associated with the new loan.
Specific guidelines and policies on credit scores, appraisals, loan-to-value ratio and more can vary by lender.
Veterans United currently requires homeowners to have no 30-day late payments in the past 12 months on the loan being refinanced.
Another important IRRRL note is that the VA streamline refinance only requires previous occupancy of the home. Unlike VA home purchase loans, you do not need to intend to occupy the property as your primary residence.
VA Streamline Refinance and the VA Funding Fee
The VA funding fee is an upfront fee applied to every purchase and refinances loan. Proceeds from this fee are paid directly to the Department of Veterans Affairs and are used to cover losses on any loans that may go into default.
The good news is the VA funding fee is lower on IRRRLs than for typical VA purchase and cash-out loans. Borrowers who are not exempt pay a 0.5 percent funding fee on their IRRRL. Borrowers can roll the VA funding fee into the loan balance. Estimate the cost of the VA funding fee with this calculator here.
Homeowners who receive compensation for a service-connected disability and qualified surviving spouses are exempt from the funding fee.
Keep in mind, refinancing may result in higher finance charges over the life of the loan.
IRRRL stands for Interest Rate Reduction Refinancing Loan. You may see it referred to as a “Streamline” or a “VA to VA.” These loans are typically used to reduce the borrower’s interest rate or to convert an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
As you’d expect, IRRLs typically must result in an interest rate reduction. Otherwise, why refinance? However, there is an exception: when refinancing an existing VA guaranteed adjustable-rate mortgage (ARM) to a fixed rate the interest rate may increase.
Besides that, there are a few other facts anyone considering an IRRRL should know.
First, no appraisal or credit underwriting package is required by the VA. You should be aware, however, that lenders may require an appraisal and credit report anyway.
Second, a certificate of eligibility is not required. Your lender can use the VA’s e-mail confirmation procedure for interest rate reduction refinance in lieu of a certificate of eligibility.
Further, an IRRRL can be done only if you have already used your eligibility for a VA loan on the same property you intend to refinance. It must be a VA to VA refinance, and it will reuse the entitlement you originally used. You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller if you assumed the loan. If you have your Certificate of Eligibility, take it to the lender to show the prior use of your entitlement.
Another important fact: an IRRRL may be done with “no money out of pocket” by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs. (Remember: The interest rate on the new loan must be lower than the rate on the old loan unless you refinance an ARM to a fixed-rate mortgage).
Not happy with your current lender? No lender is required to make you an IRRRL, however, any lender of your choice may process your application for an IRRRL. While your current lender might be the best place to start shopping for an IRRRL, you do not have to go to the lender you make your payments to now or to the lender from whom you originally obtained your VA Loan.
Veterans are strongly urged to contact several lenders. There may be big differences in the terms offered by the various lenders you contact.
Some lenders may contact you suggesting that they are the only lender with authority to make IRRRLs. Remember – Any lender may make you an IRRRL.
Some lenders may say that VA requires certain closing costs to be charged and included in the loan. Remember – The only cost required by VA is a funding fee of one-half of one percent of the loan amount which may be paid in cash or included in the loan.
You must NOT receive any cash from the loan proceeds.
The occupancy requirement for an IRRRL is different from other VA loans. When you originally got your VA loan, you certified that you occupied or intended to occupy the home. For an IRRRL you need only certify that you previously occupied it.
The loan may not exceed the sum of the outstanding balance on the existing VA loan, plus allowable fees and closing costs, including funding fees and up to 2 discount points. You may also add up to $6,000 of energy efficiency improvements into the loan. But NOTE: Adding all of these items into your loan may result in a situation in which you owe more than the fair market value of the house and will reduce the benefit of refinancing since your payment will not be lowered as much as it could be. Also, you could have difficulty selling the house for enough to pay off your loan balance.
Some lenders offer IRRRLs as an opportunity to reduce the term of your loan from 30 years to 15 years. While this can save you a lot of money in interest over the life of the loan, if the reduction in the interest rate is not at least one percent (two percent is better) and lots of new loan costs are rolled into the new loan, you may see a very large increase in your monthly payment – an increase bigger than you can afford.
Still, need more information on IRRRLs and refinancing a VA loan? The next step is to shop around for lenders, compare no-obligation rate quotes between lenders and against your current loan, and then discuss your options.
What does IRRRL stand for?
IRRRL stands for Interest Rate Reduction Refinance Loan. It’s also referred to as the VA streamline.
Is cash-out allowed with an IRRRL?
An IRRRL is generally a form of refinancing where no cash-out is allowed. However, as much as $6,000 in additional money may be borrowed to cover the cost of energy improvements completed within 90 days before closing. Ask your lender for details.
What are IRRRL closing costs?
Closing costs and fees can vary by lender. However, borrowers can typically roll these into the final loan amount. Ask your lender for details or talk with a Veterans United loan specialist at 855-870-8845.
Again, keep in mind that refinancing may result in higher finance charges over the life of the loan.
Can I refinance a 30-year mortgage to a 15-year with an IRRRL?
Refinancing to a 15-year mortgage is entirely possible and very common. The lifetime interest cost of a shorter loan will be less than a 30-year mortgage. However, the monthly payments on a 15-year mortgage can be significantly higher.
Look at both the monthly payments and lifetime interest costs to see if a mortgage with a shorter term makes sense.
Refinancing may result in higher finance charges over the life of the loan.