A VA Interest Rate Reduction Refinance Loan, commonly called a VA IRRRL or VA streamline refinance, allows eligible Denver homeowners to replace an existing VA-backed mortgage with another VA-backed loan.
The program is generally used to obtain a lower interest rate, reduce the monthly principal-and-interest payment or replace an adjustable-rate mortgage with a more stable fixed-rate loan.
Who May Qualify for a VA IRRRL?
According to the Department of Veterans Affairs, an applicant generally must:
- Already have a VA-backed home loan
- Use the IRRRL to refinance that VA-backed loan
- Certify that they currently live or previously lived in the home
A VA IRRRL is a VA-to-VA transaction. A homeowner with a conventional or FHA mortgage cannot use an IRRRL to refinance that loan. Eligible veterans with non-VA mortgages may wish to investigate other programs, including a VA-backed cash-out refinance.
Complete eligibility and occupancy requirements are available from the Department of Veterans Affairs.
What Are the Potential Benefits?
Depending on the circumstances, a VA IRRRL may offer:
- A lower mortgage interest rate
- A reduced monthly payment
- Conversion from an adjustable to fixed rate
- Less documentation than certain other refinances
- The ability to finance allowable costs
Individual lenders can establish their own underwriting and documentation requirements. Homeowners should not assume that every VA IRRRL will proceed without financial verification, an appraisal or additional review.
Does a VA IRRRL Have Closing Costs?
A VA streamline refinance is not automatically free. Expenses may include lender charges, title-related costs, recording fees, discount points and a VA funding fee.
The VA currently lists the IRRRL funding fee as 0.5% of the loan amount, although qualifying borrowers may be exempt. Funding-fee rules and exemptions should be confirmed when applying. VA funding fee information
Some costs may be incorporated into the new mortgage. Financing expenses can reduce the amount needed at closing, but it increases the balance on which interest is charged.
Will a Lower Payment Always Save Money?
Not necessarily. A lower monthly payment might result from extending the repayment period rather than receiving a dramatically lower rate.
Compare:
- Existing mortgage balance
- Remaining repayment period
- New loan amount
- Interest rate and APR
- Discount points
- Closing costs
- Break-even period
- Total lifetime interest
The break-even period estimates how long it will take for monthly savings to recover the refinancing costs. A homeowner planning to sell before that date may not receive the expected financial benefit.
Compare More Than One VA Refinance Offer
The Department of Veterans Affairs does not set the interest rate or most lender charges. Rates, discount points and closing costs can vary among mortgage companies.
Denver homeowners should request Loan Estimates from multiple lenders and compare the same loan type and rate structure. A VA IRRRL can be beneficial when it produces meaningful savings or greater payment stability, but the complete cost of the new mortgage should support the decision.
Call Jason Today at (303) 862-4742!