VA Interest Rate Reduction Refinance Loan (IRRRL)
The VA Interest Rate Reduction Refinance Loan, or IRRRL, helps veterans and service members with VA-backed home loans lower their interest rates or stabilize their mortgage payments by refinancing their loans. Also known as the VA Streamline Refinance, this process can benefit veterans who want to reduce their monthly payments or convert an adjustable-rate mortgage to a fixed-rate mortgage.
The VA Interest Rate Reduction Refinance Loan, or IRRRL, helps veterans and service members with VA-backed home loans lower their interest rates or stabilize their mortgage payments by refinancing their loans. Also known as the VA Streamline Refinance, this process can benefit veterans who want to reduce their monthly payments or convert an adjustable-rate mortgage to a fixed-rate mortgage.
On This Page
- What Is a VA IRRRL?
- Why Should I Refinance with a VA IRRRL?
- Who Is Eligible for a VA IRRRL Refinance?
- VA IRRRL Process: Step-By-Step
- What Are the Costs and Fees Associated with an IRRRL?
- How Does the VA IRRRL Compare to Other Refinance Options?
- Current VA IRRRL Interest Rates and What Affects Them
- VA IRRRL Refinancing FAQ
- Take the Next Step with a VA IRRRL Refinance
What Is a VA IRRRL?
The core purpose of a VA IRRRL is to refinance an existing VA-backed loan to a lower interest rate or to convert an adjustable-rate mortgage to a fixed-rate mortgage. Refinancing a home loan lets you replace your current loan with a new one under different terms.
The VA IRRRL process is simplified compared to other refinancing options, making it a quick and straightforward option for eligible veterans. If you have an existing VA-backed home loan and want to reduce or stabilize your monthly mortgage payments, an IRRRL may be right for you.
Why Should I Refinance with a VA IRRRL?
If you have a VA-backed home loan, an IRRRL can help you lower your monthly mortgage payment by getting you a lower interest rate or make your monthly payments more stable by moving from a loan with an adjustable or variable interest rate to a fixed rate. Some of the other benefits of choosing a VA IRRRL include:
- Lower interest rates to reduce monthly payments
- Simplified approval process with minimal documentation
- No need for a home appraisal in most cases
- The ability to switch from an adjustable-rate mortgage, or ARM, to a fixed-rate mortgage for greater stability
- Reduced VA funding fee compared to other VA loan types
Who Is Eligible for a VA IRRRL Refinance?
To be eligible for an IRRRL, you must already have a VA-backed home loan, be using the IRRRL to refinance that loan, and be able to certify that you currently live in or used to live in the home covered by the loan. There is also a “seasoning” requirement to be eligible for an IRRRL refinance, meaning you must have paid a minimum of six payments on the existing loan. You do not need to get a new Certificate of Eligibility for an IRRRL unless your lender requires it.
VA IRRRL Process: Step-By-Step
To get an IRRRL, you’ll first need to find a lender, such as a private bank, mortgage company, or credit union. Then, you will provide the lender with information such as a Certificate of Eligibility and follow their process for closing the loan, which will include paying your closing costs. With an IRRRL, you can include closing costs in the new loan, so you don’t have to pay them up front.
The following are the typical steps in the IRRRL process:
- Checking Eligibility: Confirm that you have an existing VA loan and that it meets all eligibility criteria.
- Choosing a Lender: Private financial institutions issue VA home loans. Thus, work with a lender who offers VA IRRRLs.
- Document Submission: Provide the necessary documents, such as the current loan note, mortgage statement, and employment verification.
- Closing the Loan: Complete the refinancing process and pay any associated costs, which can often be rolled into the loan balance.
What Are the Costs and Fees Associated with an IRRRL?
Keep the closing costs in mind when considering your refinancing options, as they can add up to thousands of dollars. Before refinancing, divide your closing costs by the amount you expect to save each month by refinancing to determine if it’s worth it. Generally, you can expect to break even within three years or less.
Closing costs for an IRRRL may include the VA funding fee, which is typically 0.5% of the loan amount or 1% for an unaffixed manufactured home, as well as other costs ranging from 3% to 5% of the loan amount. With an IRRRL, these costs can sometimes be rolled into the new loan balance, making the process more affordable up front.
How Does the VA IRRRL Compare to Other Refinance Options?
While the VA offers other options for refinancing VA-backed loans, the VA IRRRL has some benefits that other refinancing options, such as conventional loans or VA cash-out refinancing, don’t provide.
- VA IRRRL: No home appraisal, minimal documentation, low VA funding fee, no new Certificate of Eligibility is required.
- Conventional refinance: This may require an appraisal, higher closing costs, and stricter credit requirements.
- VA Cash-Out Refinance: This option allows you to tap into your home equity, but it requires more documentation and may involve higher fees.
An IRRRL can only be used to refinance a property on which the borrower has already used their VA loan eligibility, making it of limited use to first-time homebuyers. It must be a VA-to-VA refinance that reuses the original entitlement, and the refinanced loan cannot exceed the existing VA loan plus any financed funding fee. The IRRRL program has no income limits, and no credit review is necessary.
Current VA IRRRL Interest Rates and What Affects Them
Various factors can influence VA IRRRL rates, such as market conditions, the borrower’s credit profile and loan term, and the lender’s policies for VA IRRRL loans. The type of loan, such as fixed-rate versus adjustable-rate, can also have a significant impact. While rates for VA IRRRLs may be higher than those for purchase loans, they are still typically lower than those for conventional loans.
VA IRRRL Refinancing FAQ
What Is the Minimum Number of Payments Required To Qualify for an IRRL?
To be eligible for a VA Interest Rate Reduction Refinance Loan, at least 210 days must have passed since your first monthly payment due date, and you must have made at least six consecutive monthly payments on the loan.
Can I Refinance From an ARM to a Fixed-Rate Loan With An IRRRL?
Yes, if your current VA-backed home loan is an adjustable-rate mortgage, you can use an IRRRL to refinance to a fixed-rate loan.
Can I Refinance My VA Loan if I’ve Missed Payments?
Most lenders require no 30-day late payments in the last 12 months for IRRRL loans, though exceptions can be made for specific hardship situations.
Do I Need a Home Appraisal for an IRRRL?
The VA does not require a home appraisal for an IRRRL, though individual lenders may request one to meet their own standards.
Take the Next Step with a VA IRRRL Refinance
For veterans and service members with an existing VA-backed home loan who want to reduce or stabilize their monthly mortgage payments, an IRRRL may be a great option for refinancing. The simplicity and potential savings of VA IRRRLs make them extremely valuable.
If you’re interested in learning more about refinancing your VA home loan, check your eligibility and speak with a lender.
