VA Streamline Refinance Program (IRRRL)
The VA Streamline Refinance, VA IRRRL, or a VA Interest Rate Reduction Refinance Loan proves that VA loans aren’t only for those veterans buying a home but for those looking to refinance on an existing home. “Guaranteed” by the VA and offered by VA-approved lenders, this much-loved refinance option features a less complicated process for qualifying, less paperwork, and lower closing costs out-of-pocket.
- Interest rates and mortgage payments are lower
- You don’t have to use your current lender
- A Certificate of Eligibility is not required
- Out-of-pocket expenses are not required
- Cash-outs are not allowed, but interest rate reductions are
- You can refinance on your primary residence if you certify that you owned it previously
Determine your VA refinance eligibility. MortgageAdvisor.com is your expert in VA Streamline Refinances (IRRRL).
Streamline Refinance Explanation
By refinancing your existing VA loan, a VA Interest Rate Reduction Refinance Loan (IRRRL) can lower your interest rate. It does the same for adjustable rate mortgages (ARMs), converting them into fixed-rate VA mortgage loans, which may increase your monthly payment but will put you on a faster track to paying off your loan and protect you from dramatic payment increases in the future. How do you know if you should get a VA IRRRL Streamline Refinance Loan? If the interest rate on your current VA loan is higher current market rates, you should probably look into an IRRRL.
Refinancing With A VA Streamline IRRRL
Any VA-eligible borrower with a VA loan can refinance a current VA loan to bring down their monthly payments or to move from a costly ARM to a fixed rate loan. Here’s how the VA IRRRL program works, including the program restrictions, guidelines, and benefits.
Unlike with other refinance options on the marketing, the eligibility criteria and underwriting guidelines for VA Refinance Loans are decided and maintained by the VA. On top of that, additional lending criteria are put in place by the lenders providing the VA loans, and these criteria differ significantly from one lender to the next.
One thing that all VA Streamline Refinance Loans have in common is that they, unlike normal VA loans, do not require a Certificate of Eligibility from the VA because the borrower has already been approved by the VA for a previous loan.
Also, the VA does not mandate that lenders have an appraisal done on the property before they’ll insure the refinance loan, although a lender may.
Another peculiar aspect of VA Streamline Refinance Loans is that the interest on the new loan must be less than the interest rate on the former loan, except when the refinancing is to move to a VA fixed rate loan from a VA ARM loan. In these situations, it is natural for the rate to rise, since most ARMs start with extremely low-interest rates and fixed rate loans don’t.
Closing Costs on A Streamline Refinance IRRRL
Aside from the criteria to qualify for an IRRRL Streamline Refinance Loan, these loans also allow many veterans to refinance with no money down or out-of-pocket expenses since all the closing costs can be rolled up into the new loan. This comes in handy for any veterans looking to refinance on a tight budget and trying to figure out all of the costs that will come with their refinance.
One thing to keep in mind though when wrapping all of your closing costs into the new loan is that the new interest rate must be lower than your current rate according to the VA guidelines.
Program Change From Adjustable Rate to Fixed Rate
Unfortunately, in the early 2000s, many veterans signed up for ARM loans, which can experience dramatic changes in interest and monthly payments as the market interest rate rises and falls. Especially for these veterans, the VA IRRRL program can be a way to get out of those volatile ARM loans and into a stable monthly payment with a fixed-rate mortgage. Often this means going from a lower interest to a higher one, but the stability is more than worth it.
Under the VA IRRRL program, this was not permitted—that is, until in 2008, at the height of the subprime mortgage crisis, the VA changed the rules to allow veterans to refinance at a higher rate. The VA also changed the possible refinance loan amount: whereas it had been possible for veterans to refinance up to 90% of the property value, the changes in 2008 increased possible VA refinance loan value all the way up to 100%.
At the same time, Congress further raised the potential loan amount on VA refinances in some geographic areas throughout the country. Maximum refinance loan amounts of $417,000 were suddenly increased up to $625,500 for single-family dwellings and as much as $1,202,925 for a four-unit property. Of course, these new maximum amounts were based on which geographic areas they were in. But, ultimately, these improved loan-to-value ratios made it much more possible for veterans to refinance their properties and improve their financial situations.
Is your interest rate higher than the market average? It might be time talk to a VA-approved VA IRRRL Refinance expert about just how much money you could be saving each month on your mortgage payment. Talk to a Mortgage Advisor by calling (866) 984-1240 or fill out our quick 1-minute form to have a Mortgage Advisor contact you.