Qualified VA borrowers have access to one of the most straightforward and powerful refinance options around: the VA Interest Rate Reduction Refinance Loan (VA IRRRL), also known as a VA Streamline refinance.
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.
A VA IRRRL, pronounced as “VA earl,” is a mortgage refinance option for Veterans with an existing VA loan. The IRRRL allows homeowners to refinance an existing VA loan to a new VA loan with a lower interest rate or convert a VA loan from an adjustable to a fixed rate.
It's often called a VA streamline because it generally requires less paperwork and is faster than a typical refinance.
The typical reason many Veterans refinance is to lower their current mortgage's interest rate. IRRRL rates may vary from home purchase rates. Below are today's VA IRRRL rates.
VA IRRRL rates change daily based on market conditions. The following IRRRL rates are current as of Feb 21st, 05:16 PM CST
|VA Loan Type
|30-Year VA IRRRL Streamline
|30-Year VA IRRRL Streamline Jumbo
When refinancing, the difference in rate or terms must be enough to provide tangible benefits, such as lower monthly payments or a fixed interest rate instead of an adjustable one.
Every VA refinance situation is different. Talk through your specific situation with a loan officer who can run the numbers and help you gauge what makes the best financial sense.
With an IRRRL, there are several prominent advantages, including little to no out-of-pocket costs and no VA appraisal in most instances.
To avoid out-of-pocket costs, homeowners can choose to roll the closing costs and fees into the loan balance.
With a reduction of just half of a percent, a borrower could potentially generate tens of thousands in savings over the life of a loan.
Let's look at a quick example using the same loan terms (30-year, fixed rate) with three different interest rates.
|Monthly Estimated Principle & Interest Payment
|Total Estimated Interest Paid Over 30 Years
|$250,000 loan at 7.5 percent interest rate
|$250,000 loan at 7 percent interest rate
|$250,000 loan at 6.5 percent interest rate
Savings and interest rates shown here are for illustrative purposes only and may change based on a variety of factors. All loans require approval and proof of eligibility and are subject to the complete terms and conditions outlined in the loan agreement documents.
Want to see what you could save with a VA refinance? Estimate your savings and monthly payments with our VA loan refinance calculator.
You may be eligible for a VA IRRRL if you financed the property with a VA loan and can certify you live or previously lived in the home.
The IRRRL is not available to Veterans with non-VA loans. Veterans with non-VA loans wishing to refinance to a VA loan can look to the VA Cash-Out refinance option.
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.
VA IRRRLs have more flexible requirements when it comes to employment and income. Two years of employment history is something your lender might still require, but they typically won’t need to consider income or asset figures unless the new mortgage payment will be increasing by more than 20% or there are concerns about income stability.
Another important IRRRL note is that the VA Streamline refinance only requires previous occupancy of the home. Unlike VA home purchase loans, you do not need to intend to occupy the property as your primary residence.
Last, the maximum loan term is the term of the original VA loan plus 10 years, not to exceed 30 years and 32 days. For example, a Veteran who’s refinancing a VA loan with a 15-year term could have at most a 25-year term on the IRRRL.
Specific guidelines and policies on credit scores, appraisals, loan-to-value ratio and more can vary by lender.
Veterans United currently requires homeowners to have no 30-day late payments in the past 12 months on the loan being refinanced for a VA IRRRL refinance. The start date of your new refinance loan must be 240 or more days after you made your first monthly payment on the loan being refinanced and after you've made 7 full monthly payments on the original loan.
Our cap on loan-to-value (LTV) is currently 110% for certain Streamline refinances, including the financing of all closing costs, prepaid escrow funds, the VA Funding Fee and any acceptable energy-efficiency improvements. LTV ratios are simply the mortgage amount compared to the appraised value.
We also require the time to recoup costs and fees to be 36 months or less. This calculation does not include escrow funds. Other guidelines and requirements can apply regarding interest rate savings.
In addition, we require verbal verification of employment to be completed prior to closing and an appraisal is required if the base loan amount exceeds $1 million.
There is no hard credit inquiry required, only a soft credit pull will be completed at closing.
|Pros of VA Streamline Refinance
|Cons of VA Streamline Refinance
|Potential for lower mortgage payment
|Will need to wait for rates to drop below your current rate
|No cash-out at closing
|Doesn’t require credit check
|Will still need to pay closing costs
|Fast closing time
|Option to change loan terms
|Lower VA funding fee than purchase loans
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 and cash-out loans. Borrowers who are not exempt pay a 0.5 percent funding fee on their IRRRL. Borrowers can roll the VA funding fee into the loan balance.
Estimate the cost of your funding fee with our VA Funding Fee calculator.
Homeowners who receive compensation for a service-connected disability, qualified surviving spouses and select others are exempt from the funding fee.
Keep in mind that refinancing may result in higher finance charges over the life of the loan.
IRRRL stands for Interest Rate Reduction Refinance Loan. It's also referred to as the VA Streamline.
Generally, the borrowers on the original VA loan need to be on the new IRRRL unless the death or divorce of an applicant occurs. Lenders can not look to remove a currently married or separated spouse from the new loan if they’re obligated on the old one.
VA IRRRLs are unique when it comes to VA loan entitlement. Getting an IRRRL does not require the use of a new or additional entitlement. Whatever amount of VA loan entitlement was used to secure the original purchase loan remains the same for the new loan, regardless of the loan amount.
Having a higher or lower loan amount on the IRRRL can affect the guaranty amount, which reflects how much lenders would recoup in the event of default. But it cannot affect the amount of a Veteran’s previously used entitlement.
An IRRRL is generally a form of refinancing where no cash-out is allowed. However, as much as $6,000 in additional money may be borrowed to cover the cost of qualified energy efficiency improvements completed within 90 days before closing. Ask your lender for details.
Closing costs and fees for a VA IRRRL can vary by lender, but typically range from 3% to 5% of the loan amount. Borrowers can typically roll these into the final loan amount instead of paying the costs upfront. Ask your lender for details or talk with a Veterans United loan specialist at (253) 617-6200.
Refinancing to a 15-year mortgage is entirely possible and very common. The lifetime interest cost of a shorter loan will be less than a 30-year mortgage. However, the monthly payments on a 15-year mortgage can be significantly higher.
Look at both the monthly payments and lifetime interest costs to see if a mortgage with a shorter term makes sense.
Refinancing may result in higher finance charges over the life of the loan.
Refinancing may result in higher finance charges over the life of the loan.