Interest Rate Reduction Refinance Loan

IRRRL stands for Interest Rate Reduction Refinance Loan. You may hear it referred to as a “streamline” or as a “VA to VA”.  The VA IRRRL loan is a loan that is guaranteed by the US Department of Veteran Affairs and allows you to decrease your mortgage payment on an existing VA home loan by lowering your interest rate. Adjustable Rate Mortgages (ARM) are also able to be refinanced into a fixed rate mortgage.

Characteristics of an IRRRL

• An IRRRL does not require an appraisal. This can be extremely beneficial for home owners because it speeds up the process significantly.
• No out of pocket costs. This sounds too good to be true but it isn’t! Village Capital & Investment LLC is able to include the costs in the new loan or we are able to increase the interest rate enough that it will actually cover those costs.
• It is possible that your interest rate will increase when refinancing from your current VA ARM loan to a fixed rate loan.
• Under an IRRRL, you are not eligible to receive any cash from the loan proceeds.
• The rate on your new loan is required to be lower than the rate on your old loan unless you are refinancing into a fixed rate mortgage from an adjustable rate mortgage. If you are refinancing from an ARM to a fixed rate mortgage, the interest rate may go up.

Am I Eligible For An IRRRL?

You may only refinance a property under an IRRRL if you have already used your VA loan eligibility on that property. This means that it must be a VA to VA refinance, and it will reuse the entitlement you used in the first place.

The requirement of occupancy is different on an IRRRL than on other VA loans because you will only have to show that you have previously occupied the home, as opposed to when you originally got your VA loan and you certified that you intended to occupy or currently occupied the home.

Please note:

• No other loan besides your current VA loan may be paid off by the proceeds of an IRRRL. The holder of your secondary loan will need to agree to subordinate that lien in order for your first mortgage to be your VA loan.
• You are not required to provide a Certificate of Eligibility.
• It is possible that you used your entitlement when you obtained your VA home loan.

Reducing the term of your loan from 30 years to 15 years

Lenders will use an IRRRL as an opportunity for a borrower to reduce their loan term from 30 years to 15 years. This can be both good and bad, and the borrower must use caution when exercising this eligibility. It is true that you can save money over the life of the loan in interest when reducing the loan term, however, 15 year loans tend to have higher monthly payments. Be sure to go over all of your options with your loan officer.

VA Funding Fee

The VA funding fee on a VA IRRRL is a set percentage of your loan amount, unless you have an exemption.

You maintain the option to either finance the VA funding fee or pay it with cash. However, the funding fee is required to be paid at closing. You are considered exempt from the funding fee if you meet one of the following:

• You are a surviving spouse of a Veteran who died while in service or from a service related disability.
• Veteran who would be entitled to receive compensation for a service related disability if you were not receiving retirement or active duty pay.
• Veteran who is receiving VA compensation due to a service related disability.

VA IRRRL Program Guidelines

• No 30 day lates. You must be current on your mortgage.
• Lower Payment. Veteran’s Affairs dictates you must have a lower monthly payment on your VA loan as a result of the IRRRL program unless you are switching from an adjustable rate mortgage to a fixed rate mortgage.
• No Cash Out. You are not allowed to get any cash from an IRRRL. If you are looking for cash-out options please refer to the cash-out refinance.
• Previous Occupation. You do not have to live on the property in order to refinance it, but you do have to prove you occupied the home at one time.
• VA to VA Loan. You have to have already used your eligibility for a VA loan on the property that is being refinanced.

If you’re ready to take advantage of the interest rate reduction refinance loan program, then use the button below to contact one of our licensed loan officers.