If you served or are the surviving spouse of someone who served, and you are interested in learning about how you can make your current mortgage more affordable through refinancing, keep reading.
With the current low-interest-rate climate, you might be considering mortgage refinancing as a way to lower your monthly payments or interest costs. If you own your home through an existing VA mortgage loan, here’s what you need to know about the VA IRRRL refinance program.
In this post, we’ll look at the VA Interest Rate Reduction Refinance (“IRRRL”)–sometimes called the VA IRRRL refinance or VA streamline refinance–who’s eligible, its benefits and advantages, and the important features of the program.
What Is The VA IRRRL Refinance?
The VA IRRRL refinance was created to make your current mortgage more affordable. It does this by reducing your interest rate to match current market rates.
For homeowners who currently hold a mortgage through a VA loan program, the VA IRRRL refinance is arguably one of the most straightforward loan products to qualify for. Additionally, it carries more lenient requirements when compared to conventional mortgages.
What Is Refinancing?
The term refinancing refers to getting a new loan, often with better terms, and using the money from that new loan to pay off your initial mortgage. The VA IRRRL refinance program is a home loan backed by the Department of Veterans Affairs (VA). The VA IRRRL requires less paperwork and has fewer requirements than conventional refinancing loans.
QUICK TAKE: VA IRRRL REFINANCE OFFERS
- A reduced interest rate
- The chance to switch from an adjustable-rate mortgage (ARM) to a fixed-rate.
- The same benefits that accompany other VA loans, such as no home appraisal or out-of-pocket closing costs.
Who Is Eligible For VA IRRRL Refinance?
To be eligible for the VA IRRRL refinance loan, you need to meet one of the following criteria:
- You are an active service member, a discharged service member (any type except dishonorably), or a retired service member who served a minimum of 90 consecutive active service days during wartime, 181 active service days during peacetime, or a combination of both.
- You served a minimum of six years with the Selected Reserved or the National Guard.
- You are the surviving spouse of a service member-however, additional conditions may be required to meet surviving spouse eligibility.
In addition to the criteria above, you’ll be expected to complete a VA Certificate of Eligibility (COE) before your loan can be approved. You can use your original COE from your initial mortgage. If you no longer have access to your original COE, you can apply for a new COE online
Besides meeting eligibility for benefits under the VA as detailed above, borrowers will typically need their current VA loan to be in good shape, without late or missed payments. Lenders can also ask borrowers to show proof of employment.
Because VA IRRRL refinance loan applicants need only to demonstrate they lived in the home at some point during the original mortgage, borrowers can potentially qualify for loans for rental properties. Although homes currently listed for sale are ineligible for refinance mortgage loans through the VA IRRRL program.
VA IRRRL Benefits And Advantages
Refinancing your mortgage with a VA IRRRL refinance loan can help you get a lower monthly mortgage payment or a better interest rate. If you currently have an adjustable-rate mortgage, moving to an IRRRL allows you to lock in a regular monthly payment with a fixed-rate mortgage.
Compared to conventional refinancing options, the VA IRRRL refinance is a streamlined process.
Your VA IRRRL refinance does not have
- An appraisal fee or require a home appraisal
- A minimum credit score
- A minimum income requirement
- Credit underwriting
- Out-of-pocket costs–when you roll your closing costs into the total amount of your new mortgage.
Because the VA doesn’t offer loans directly — it backs them, providing lenders an opportunity to recover any losses should a borrower foreclose — borrowers will have to use a lender like the VA IRRRL streamline refinance specialists at River City Mortgage. But because lenders have less associated risk, they can offer better terms and lower interest rates to help you get the best possible financing option available.
Are There Potential Drawbacks To A VA IRRRL?
Despite its popularity, a VA IRRRL refinance loan isn’t the best solution for all veterans. Every person’s situation is unique, and it requires careful consideration and evaluation of why you’re thinking about refinancing.
Potential drawbacks can include:
- Inability to withdraw cash from your home equity through a VA IRRRL refinance loan (other refinancing options allow for CashOut refinancing)
- Switching to a fixed-rate mortgage from an ARM doesn’t automatically guarantee a lower interest rate.
Are There Costs Tied To A VA IRRRL?
VA IRRRL requires borrowers to pay a VA funding fee at closing or rolled into the total mortgage amount. The current VA funding fee is 0.5% of the total loan amount and helps ensure the VA IRRRL loan program will be available for future veterans.
Exemptions to the VA Funding Fee exist for those who fall into one of the following groups:
- If you are a veteran living with service-related disabilities
- If you are the surviving spouse of a veteran who died from a service-related cause, was wholly disabled, or who died during active duty
- If you are an active-duty service member who has been awarded a Purple Heart
What Should I Do Next?
If you are interested in a VA IRRRL refinance loan, you can apply online or reach out to the regional VA IRRRL specialists at River City Mortgage. We’ll sit down with you and carefully go over all the available options with you. We want to help you determine how much you could potentially save and which loan products are best for you and your family.