An Interest Rate Reduction Refinance Loan (IRRRL), also known as a streamline loan or VA refinance, is a powerful tool to help veterans save money on their VA loan by reducing their interest rate. Here are some ways an IRRRL can help veterans:
- Save money on the VA loan by refinancing to a lower interest rate and reducing monthly payments
- Refinancing an adjustable-rate mortgage (ARM) to a fixed-rate VA loan term
- Offers simplified paperwork to qualify for the interest reduction
Qualifying for an IRRRL
Here is how a veteran can qualify for an IRRRL:
- You must be refinancing an existing VA loan.
- No appraisal or credit check required
(However, a lender may still ask for an appraisal and/or credit report.)
- No Certificate of Eligibility (COE) is required
- Less stringent occupancy requirements than other VA loans; you only need to certify that you previously occupied the home
- Can be done with no “out of pocket” expenses by rolling any closing costs into the new loan
(Remember, however, that the interest rate on an IRRRL must be lower than your current loan and including costs in the new loan could increase your rate.)
What else should I know about an IRRRL?
Here are some additional details you should keep in mind to ensure a VA refinance is right for you.
- Your new loan amount is unable to be greater than your current VA loan balance. The new loan amount can include any of the fees, closing costs or up to 2 points (mentioned above) that may be required of you. Additionally, if you have any plans to make energy efficient improvements to your home, you can include up to $6,000 worth of those costs in the new loan amount.
- The Federal Housing Finance Agency enforces conforming loan limits, which restrict mortgage loan companies from originating loans over a certain amount. This amount can vary each year depending on which county the home is located in. For more information specific to your area check the VA Home Loan Limits.
- You don’t have to use the same lender you used for your original VA loan, to obtain your IRRRL. Do your research and find the best rate for your new VA loan.