It's truly a relief to be able to refinance your home with very low closing costs and great rates. Veterans who have served their country deserve no less than the best, and that is why the VA Loan streamline refi works! A VA Interest Rate Reduction Refinance Loan — or IRRRL (pronounced “Earl”) — is often called a “VA streamline refinance” because the lending approval process is greatly simplified. An IRRRL doesn’t require an appraisal or go through the typical VA lender underwriting process. That saves a lot of time, paperwork and fees.
How does a VA IRRRL work?
A VA IRRRL is used to refinance one VA mortgage into another. You get a lower rate, lower payment, or both. You can change to an adjustable rate or fixed rate. IRRRL's are much easier than regular VA loans.
You’ll still need to deal with a Department of Veterans Affairs-approved lender. And the VA is adamant that a refinance must offer a real financial benefit. That means you’ll need to lower your interest rate or reduce your monthly payment.
Refinancing your mortgage can be a great way to save on interest. Can you can get a cash-out VA streamline refinance?
The answer is no, but there’s an exception: Up to $6,000 in cash can be taken out from your IRRRL for energy-efficient improvements. A lender may require an energy audit of your home to prove the upgrades will provide a real return on investment.
Other than that, there are no other cash-out options on an IRRRL. Your closing costs can be rolled into your loan balance or priced into your interest rate, just like any other VA home loan.
IRRRL: Go from ARM to fixed.
You can use a VA streamline refi to trade your adjustable-rate mortgage for a fixed-rate loan.
Moving from an ARM to a fixed-rate loan is the one instance when the VA will allow you to increase your mortgage interest rate on a refi.
If you want to move to a shorter term — say from a 30-year to a 15-year mortgage — you can do that, too. You’ll save a lot of interest over the life of the loan, but your payment will be higher. A good VA lender will work with you to make sure that any increase in your monthly mortgage payment will still work within your estimated living expenses.
VA IRRRL qualifications and fees
The looser restrictions don’t stop there: You don’t even have to live in the home to qualify for a VA IRRRL. That means you can use it to refinance a house you’re currently renting out. You’ll need to certify that you previously lived there.
Am I exempt from the VA Funding Fee?
One thing you can’t avoid is the VA Funding Fee. For most borrowers, that will mean a 0.5% charge. The fee is waived for some VA borrowers, including those with service-connected disabilities and certain surviving spouses. It’s always a good idea to shop more than one lender, even for something as simple as a VA IRRRL. That’s because interest rates and closing costs can vary from one lender to another, and some lenders “overlay” certain loan requirements that others don’T.