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Interest rate reduction refinance loan (IRRRL)

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Last editedJun 20212 min read

Do you have a VA-backed home loan and find it difficult to meet your payment obligations? You might be able to reduce your monthly repayments using an interest rate reduction refinance loan (IRRRL). Refinancing your mortgage can potentially give you access to the best VA IRRRL rates. Here’s how to get started.

What is an interest rate reduction refinance loan (IRRRL)?

The US Department of Veterans Affairs (VA) backs loans for military families and veterans. If you already have a VA loan, you might also be eligible for the interest rate reduction finance loan (IRRRL). Also called the VA loan streamline refinance program, it allows homeowners to refinance their existing VA loans at lower interest rates. In addition to better VA IRRRL rates, the streamline program also gives access to shorter loan terms or fixed interest rates.

IRRRL rates are designed to be easily accessible, without any minimum credit score or income required for eligibility. This is why it’s called the VA streamline loan program, designed to streamline your VA home loan into a more manageable repayment package.

Who is eligible for VA streamline loans?

The application process for a VA streamline loan is quick and easy, but you must meet some basic eligibility requirements.

  1. You must already have a VA-backed home loan

  2. You must use the IRRRL to refinance this existing loan

  3. You must be able to certify that you either currently or formerly lived in the home

All three of these requirements must be met to be eligible for the better IRRRL rates. Another factor to consider is that if you’ve already taken out a second mortgage, the lender must agree to make the VA-backed loan your first mortgage.

Beyond these requirements, you don’t need to worry about verifying income or meeting a credit score requirement. There’s no need to apply for a new Certificate of Eligibility or arrange any home appraisals, like you might need for other refinancing programs. It’s designed to save military families and veterans time and money, with the stipulation that this refinance is only used to pay for the VA-backed mortgage.

Advantages of VA loan streamline refinance

If you already have a VA-backed home loan, why should you consider the streamline finance program? IRRRL loans carry several benefits.

  • They can lower your monthly mortgage payments due to lower interest rates.

  • They can make your monthly repayment more predictable by switching from an adjustable rate to a fixed rate.

With greater stability and lower interest rates, you’ll be better able to manage your finances.

However, you should always read the terms and conditions carefully to be sure you’re truly taking advantage of these potential benefits. There are often closing costs involved with refinancing, which can tack on thousands of dollars to your repayment plan. Make sure that your benefits outweigh any fees.

How to find the best VA IRRRL rates

If you’re ready to get started with taking advantage of VA IRRRL rates, here’s how to apply.

  • Step 1: Find an eligible VA-approved lender. This includes a select list of credit unions, mortgage providers, and private banks.

  • Step 2: Provide your lender with required information including the Certificate of Eligibility. You can find this on the VA Home Loan program portal if you don’t have a paper copy close at hand.

  • Step 3: Follow your lender’s application requirements and pay any associated closing costs. This could include a VA funding fee, which helps pay for the loan program. Bear in mind that the IRRRL rates include these costs, so you don’t necessarily have to pay them up front.

There’s no cap on the amount you can borrow, but lenders will take VA liability limits into consideration. One final thing to consider when looking at the VA loan streamline refinance program is that it must be your first mortgage. As mentioned above, if you’ve taken out a second mortgage you’ll need to come to an agreement with the lender. This helps protect the lender by ensuring that the VA backs the loan in case of default.

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