Last Updated on February 7, 2023 by Bob Filipczak
The VA IRRRL isn’t just another weird acronym created by the Veterans Administration that’s designed to confuse you. It’s actually a very useful loan program that is sort of an offshoot of the very popular VA Home Loan Program. VA Loans have helped more than 25 million veterans and active duty armed forces personnel since it began, and it helped 1.2 million heroes in 2020 alone.
What is the VA IRRRL?
The VA Interest Rate Reduction Refinance Loan, or VA IRRRL, is a program that helps military professionals and veterans refinance their current loans. Interest rates on mortgages move around in the real estate world because interest rates change based on the decisions made by the Federal Reserve bank. When interest rates move, lending institutions and banks start talking to folks about refinancing their mortgages.
While having a regular VA Loan is a very good deal, the VA IRRRL is a way to make it even better. It is a loan that replaces your current mortgage with another VA-insured mortgage, but this one has a lower interest rate. It keeps you as part of the VA Loan program, but having a lower interest rate has short-term and long-term benefits.
It’s important to remember that the IRRRL VA loan is only available to the current VA Loan holders. If you haven’t gone through their process and been approved for (and received) a VA Loan, this refinance option isn’t available to you. If you do have a VA Loan, this may be the next logical step for you.
Why Do I Need a VA IRRRL?
Doing a refinance of your current VA mortgage can save you a lot of money right away and over the long run. The mechanics of a refinance are straightforward. You replace your current loan with a new loan that has a lower interest rate. That’s it. Period.
Getting a lower interest rate on your mortgage will immediately have a lower monthly payment. In the short term, that can help your budget and give you more income to spend on the things you need (or want). In the long term, it means you will be paying less interest on your new VA loan over the life of your mortgage. During the course of a 30-year or 15-year mortgage, the savings will be in the thousands or tens of thousands of dollars.
Refinancing can also be helpful if you currently have an adjustable rate mortgage (ARM) and want to move to a fixed rate. The fixed rate mortgage will give you more stable monthly payments and fewer surprises.
What are the VA IRRRL Benefits?
The benefits of obtaining a VA IRRRL loan are considerable. First off, it’s also called a VA streamline refinance for a reason. The good news is that the U.S. Department of Veterans Affairs has made this process as easy as possible. They have done a lot to remove obstacles and speed bumps from this VA streamline loan. The streamlined process includes:
- Less documentation – the process requires a lot less paperwork than a traditional refinance and can often be completed in 30 days.
- Low interest rates – always check with your lender, but VA IRRRL rates are typically lower.
- No private mortgage insurance – This is another monthly cost, often tacked onto your mortgage payment, that you can avoid.
- Easy credit check –There is no credit score check or proof of income required.
- No home appraisal –You don’t have to have your current home appraised to get the loan–saving you more money on fees.
- Low VA funding fee –The VA does charge a one-time funding fee, but this fee is reduced on the VA IRRRL and waived if you were disabled during your service or were awarded a Purple Heart.
One thing to remember is that there will be closing costs at the end of the refinancing process. Those can include things like taxes, lender’s fees, home insurance premiums, etc. In many cases, these closing costs can be folded back into the mortgage loan and included in your monthly payments if you don’t have the money available. Discuss that with your lender up front.
Are There Any Eligibility Requirements?
The primary requirement to be eligible for the VA IRRRL is to already have a VA loan for your house. You probably remember going through that process–getting the Certificate of Eligibility, filling out the forms, going through the closing. Since you already did all that work, the IRRRL loan program doesn’t need you to do it again. There are a few things for qualified borrowers to remember.
First, this is not a “cash out” refinance. In some refinancing arrangements, the borrower refinances the loan so they can take some of their equity in the home out as cash. You can’t do that with the IRRRL; the only exception is if you are taking cash out to do energy-efficient improvements to your home.
Second, you need to certify that you have lived in the home–maybe not currently but it had to be your primary residence some time in the past. Also if you just landed your VA loan for the house, you need to wait at least 6 months before applying for an IRRRL.
Third, you actually need to prove you are getting a better interest rate by refinancing. The VA will not guarantee the loan if you are not saving money on interest. The only exception is if you are refinancing from an adjustable-rate mortgage to a fixed rate mortgage.
First Steps – Homes for Heroes
One of the first steps to getting an IRRRL is finding a VA lender. The VA will guarantee and insure the loan, but the money for the refinance will come from a private mortgage company. The loan officer there will help you work through the process.
That’s where Home For Heroes can help. We help active duty service members and veterans find new homes, sell their homes AND refinance their current property. As part of our mission to help heroes, we connect you with the right people for your real estate, mortgage and refinancing needs. We have a network of affiliated mortgage companies who have signed on to our mission to help heroes. Our mortgage specialists have the skills to help you navigate the VA IRRRL program.
Find out how we can help you refinance your current mortgage and take advantage of all the benefits you are entitled to.