VA IRRRLs

What is a VA IRRRL?

VA IRRRL stands for VA Interest Rate Reduction Refinance Loan. It is a streamline refi designed specifically for veterans and their beneficiaries, to help them lower the interest rate on their existing VA home loan by refinancing it into a lower rate. It can also be used to refinance a VA adjustable home loan into a fixed rate mortgage.

What makes the VA IRRRL so great, is how little it requires of the borrower. Because it can be used only to refinance an existing VA home loan into either a lower rate, or out of an adjustable and into a fixed rate, very little qualifying is necessary.

Quick VA IRRRL Facts

  • No appraisal or credit underwriting package is required when applying for an IRRRL.
  • An IRRRL may be done with “no money out of pocket” by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs.
  • When refinancing from an existing VA ARM loan to a fixed rate loan, the interest rate may increase.
  • A Certificate of Eligibility (COE) is not required. If you have your Certificate of Eligibility, take it to the lender to show the prior use of your entitlement.

Now, while the loan has a great deal less paperwork and headache than your average loan, there are still some requirements:

  • You must be current on your existing mortgage, with no late payments in the last 12 months.
  • You cannot receive any cash out from the refinance – it is rate & term only.
  • No loan other than an existing VA loan may be paid off; an existing second must resubordinate.
  • You must have used (or substituted) your VA entitlement on the property to be refinanced.
  • Unlike other VA loans, you must only certify that you have previously occupied the home.

Loan Limits

While the VA does not set a cap on how much one can borrow, it does set a cap on how much of the loan will be guaranteed by the VA. This limit varies by county. For further information on loan limits in your area, call us at 619-993-9888 or email sean@theunrealty.com.

VA Funding Fee

With certain exceptions, all veterans must pay a funding fee to the VA for their VA Home Loan Guarantee. This is not a fee paid to the lender, but rather helps reduce the cost of the VA benefit to taxpayers. On a purchase, the VA funding fee for a first time user is 2.15%, and subsequent use carries a 3.3% fee. BUT, the VA IRRRL refinance program only carries a funding fee of .50%! Again, the purpose of the program is to help veterans lower their monthly costs, and the cost of the program (the risk) is much lower to the taxpayers because of that.

You have the option to finance the VA funding fee or pay it in cash, but the funding fee must be paid at closing time. You do not have to pay the fee if you are a:

  • Veteran receiving VA compensation for a service-connected disability, OR
  • Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay, OR
  • Surviving spouse of a Veteran who died in service or from a service-connected disability.

For more information, or to find out how much a VA IRRRL can save you every month, please call:

619-993-9888 or email sean@theunrealty.com.