Qualified VA homeowners have access to one of the simplest yet most powerful refinance options around the VA Interest Rate Reduction Refinance Loan (IRRRL).
This refinance option offers homeowners some significant benefits, often with minimal paperwork and costs you can finance into the new loan.
To be sure, every refinance situation is different. Talk through your specific situation with a loan officer you trust. They can run the numbers and help you gauge what might make the best financial sense.
Here are several questions to ask before refinancing.
First, what is the VA IRRRL? An IRRRL, also known as a VA Streamline, is essentially a quick refinance with relatively fewer requirements than a VA Cash-Out refinance. It can allow veterans and military families to refinance existing VA loans to a lower rate or convert from adjustable to fixed-rate financing without a lot of paperwork or hassles. Unlike most loan products, there is no appraisal requirement, the usual documentation is unnecessary and a new Certificate of Eligibility (COE) is not required. Guidelines and requirements can vary by lender.
Second, is the VA IRRRL worth the difference? The difference must be enough to give you a real benefit such as monthly payment savings or a fixed rate rather than an interest level that adjusts.
Third, what is the VA IRRRL Funding Fee? For most VA borrowers there’s a 0.5 percent Funding Fee. However, the VA Funding Fee can be waived in certain cases, such as veterans with a service-connected disability, those entitled to receive compensation for a service-connected disability who did not receive retirement or active duty pay, and the surviving spouse of a veteran who died in service or from a service-connected disability.
Importantly, the funding fee, when there is one, may be paid from the proceeds of the new loan. Estimate your VA IRRRL funding fee with our free VA funding fee calculator
Fourth, what are your other closing costs? Costs and fees can vary by lender. The good news is VA Streamline borrowers can finance their closing costs. Ask your lender for details or talk with a Veterans United loan specialist at 855-524-7279
Fifth, would it make sense to go from 30-year financing to a loan with a 15-year term? This can be done with an IRRRL. The lifetime interest cost of a shorter loan will be less than a 30-year mortgage, however — and this is a big catch — the monthly payment for the 15-year loan can be significantly higher. Look at both the monthly payments and lifetime interest costs to see if a mortgage with a shorter-term would be attractive in your situation.
Sixth, is cash-out allowed with an IRRRL? 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 energy improvements completed within 90 days before closing. Ask your lender for details.
The VA says the “occupancy requirement for an IRRRL is different from other VA loans. For an IRRRL you need only certify that you previously occupied the home.” In other words you may be qualified for an IRRRL even though you do not currently occupy the property. Conceivably, a home bought as a primary residence and later converted for use as a rental could qualify for an IRRRL. Again, ask your lender for details.
Interest rates today are not far from historic lows. VA IRRRL benefits can lead to monthly savings or a fixed-rate loan which can be a good deal for many qualifying veterans and military families. At least it’s worth a look. Estimate your monthly payment with a VA IRRRL today.
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