What to Know About the Streamline Refinance VA Loan Program: The VA IRRRL

two people holding hands clasped opposite from one another on top of mortgage contract at table

If you’re a military member or veteran who currently holds a VA mortgage on your home or on a home that you rent, you may have wondered if it would be possible to refinance your VA loan to save money.  In researching your options, you may have come across information about the VA Streamline Refinance Loan, which is known by the official name of VA Interest Rate Reduction Refinancing Loan (VA IRRRL).  

This refinancing option offered by the VA to active military members, veterans, disabled veterans, and surviving military spouses is a program that allows you a streamlined approach to refinancing your VA loan in order to save money or lower your overall loan interest rate.

What are the Benefits of Using a VA Interest Rate Reduction Refinancing Loan (IRRRL)?

 There are several benefits to using a VA IRRRL Loan to refinance your current VA mortgage loan.  Some of the key benefits include:

  • No appraisal needed.
  • Shorter time-frame to complete the loan processing.
  • Lowered fees.
  • Less paperwork.

In addition to these benefits, there are several ways to customize the VA IRRRL Loan to meet your overall financial goals.  

  • If your current VA mortgage loan is a fixed-rate loan, you can refinance to take advantage of a lower interest rate that will result in a lower monthly payment.
  • If your current VA mortgage loan is an adjustable-rate loan, you can refinance to lock-in a low, fixed-rate instead, thus avoiding the outcome of having your mortgage payment rise and fluctuate in the future with the adjustable-rate.
  • If your current VA mortgage is either a fixed-rate or an adjustable-rate 30-year loan, you can opt to a fixed-rate, shorter-term loan of 20 or 15 years, as long as you ensure that the new payment will still be affordable.  While this may result in a higher monthly payment, you will save money over the life of the loan due to paying less interest on a 15-year mortgage as compared to a 20-year or 30-year mortgage.
  • You can use a VA IRRRL Loan on a home that you own but are currently renting; the VA IRRRL Loan is not limited to your current domicile.

What are the Limits to Using a VA Interest Rate Reduction Refinancing Loan (IRRRL)?

 There are some limits to consider when using a VA IRRRL Loan.  You will need to work with a VA approved lender who can process the loan for you.  You will also need to adhere to the VA Loan Limits for lending amounts.  

  • For 2019, the VA Loan Limit is $484,350, with the exception of Honolulu County, New York County, and San Francisco County where, due to the higher cost of living in these counties, the loan limit is $726,525.
  • For 2020, the VA Loan Limit is removed, offering you the opportunity to refinance a higher-priced property as needed.

Your VA IRRRL Loan processor must also be able to show a definitive financial benefit to you as the result of the refinanced loan, whether it is a lower interest rate, a shorter-term loan, or a lower monthly payment.

You are also responsible for paying a 0.5% funding fee and any closing costs, but those can both be rolled into the VA IRRRL Loan or can be paid in cash at closing.

Can a VA Interest Rate Reduction Refinancing Loan (IRRRL) be a Cash-Out Refinance?

There is no option to use a VA IRRRL Loan as a cash-out refinance loan; you can, however, take up to $6000 out at closing solely for the purpose of energy improvements to your home.  Your lender may require an energy audit to prove that the energy improvements are both necessary and financially beneficial before approving the $6000 energy improvement cash-out.

It is important to note that you have several options to consider when looking at potential lenders for a VA Refinance IRRRL Loan.  You are not required to use your current VA lender as the originator for the new VA Refinance IRRRL Loan. Instead, you are free to shop around, research, and compare VA approved lenders who specialized in the VA IRRRL Loan program.

There are many lenders out there who claim to be specialists in the VA IRRRL Loan program but may only have limited knowledge and experience in processing these loans.  If you’re serious about pursuing a VA IRRRL Loan to save money on your home’s mortgage, contact Pacific Mortgage Group. 

At Pacific Mortgage Group, we specialize in VA IRRRL Loans and understand the complexities of the VA streamline refinance process.  Our goal is to serve our clients by understanding their goals, whether it is a rate reduction, moving from an adjustable-rate mortgage to a fixed-rate mortgage, or simply lowering your overall monthly loan payment.  

Contact us today to learn more about the VA IRRRL Loan.