VA Refinance (IRRL)
Refinancing Your VA Home Loan with a VA Streamline
If you have a pre-existing VA home loan and want to refinance, you can take advantage of the Interest Rate Reduction Refinance Loan (IRRRL) program also administered by the Veterans Administration. The IRRRL—which also goes by the name of VA streamline—allows homeowners to reduce current mortgage interest rates and change the term of their loan.
The application process for an IRRRL is much simpler than for a regular loan and does not require a Certificate of Eligibility (COE). First, you contact a lender who offers a lower interest rate than the one you’re paying. The lender then certifies that the current loan is guaranteed by the Veterans Administration and you sign for the loan. In most cases, the VA requires no appraisal for credit underwriting, although the lender may require these documents for its records.
The maximum loan amount for which you qualify is calculated by adding together:
- your outstanding loan balance
- the costs of any energy efficient improvements
- allowable fees and closing costs
The only two restrictions that the Veterans Administration places on this loan are that:
- the new loan must have a lower interest rate or different term (unless the original loan was an adjustable rate mortgage)
- you may not receive cash back from it
The funding fees that the Veterans Administration charges to do these types of loans are .5%, which is much less than what the VA charges for regular home purchase loans. And that rate applies to both first and multiple-time users of the IRRRL program.
As a veteran, you are exempt from paying most or all of the closing costs or fees. As with regular VA loans, it’s either the seller or lender who must cover those costs. What all this means for you is that you can keep your refinancing costs at a minimum so that you can have even further savings.