VA Streamline Refinancing (IRRRL)
VA Streamline Refinancing (IRRRL)
The Streamline refinance, or Interest Rate Reduction Refinance Loan (IRRRL), is one of the best options for homeowners who already have a VA Loan and would like to refinance into a lower interest rate and lower their monthly mortgage payment.
VA Streamline refinance loans are relatively easy and can be completed quickly, due to the fact that homeowners are refinancing from one VA Loan product to another.
Benefits
With an IRRRL, there are several prominent advantages, including no required appraisal in some cases, no need to obtain another Certificate of Eligibility and little to no out-of-pocket costs.
To avoid out-of-pocket costs, homeowners can choose to roll the closing costs and fees into the balance of the loan.
Rates
Today's interest rates are at competitive levels, and 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.
Requirements
To be eligible for a VA Streamline refinance, the property must currently be financed with a VA Loan. The IRRRL is not available to veterans with non-VA loans.
Generally, the VA requires the IRRRL to result in a lower principal and interest payment for the veteran homeowner, unless the veteran is:
Refinancing an adjustable-rate mortgage into a fixed-rate loan
Refinancing into a shorter loan term, or
Financing qualified energy efficiency improvements into the new loan
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.
The IRRRL only requires previous occupancy of the home. You do not need to intend to occupy the property as your primary residence.
Additionally, the borrower is not allowed to extract cash from their equity using an IRRRL. The VA has a separate loan product for this purpose – the VA Cash-Out refinance.
VA Streamline Refinance and the VA Funding Fee
The VA Funding Fee is an upfront fee applied to every purchase and refinance 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 loans and for the Cash-Out refinance. Borrowers who are not exempt pay a 0.5 percent funding fee on a Streamline.
Homeowners who receive compensation for a service-connected disability and qualified surviving spouses are exempt from the funding fee.
