Interest Rate Reduction Refinance Loan
IRRRL stands for Interest Rate Reduction Refinance Loan. You may hear it referred to as a “streamline” or as a “VA to VA”. The VA IRRRL loan is a loan that is guaranteed by the US Department of Veteran Affairs and allows you to decrease your mortgage payment on an existing VA home loan by lowering your interest rate. Adjustable Rate Mortgages (ARM) are also able to be refinanced into a fixed rate mortgage.
Characteristics of an IRRRL
- An IRRRL does not require an appraisal. This can be extremely beneficial for home owners because it speeds up the process significantly.
- No out of pocket costs. This sounds too good to be true but it isn’t! Village Capital & Investment LLC is able to include the costs in the new loan or we are able to higher the interest rate enough that it will actually cover those costs and allow us to pay that.
- It is possible that your interest rate will increase when refinancing from your current VA ARM loan to a fixed rate loan.
- Under an IRRRL, you are not eligible to receive any cash from the loan proceeds.
- The rate on your new loan is required to be lower than the rate on your old loan unless you are refinancing into a fixed rate mortgage from an adjustable rate mortgage. If you are refinancing from an ARM to a fixed rate mortgage, the interest rate may go up.
Am I Eligible For An IRRRL?
You may only refinance a property under an IRRRL if you have already used your VA loan eligibility on that property. This means that it must be a VA to VA refinance, and it will reuse the entitlement you used in the first place.
The requirement of occupancy is different on an IRRRL than on other VA loans because you will only have to show that you have previously occupied the home, as opposed to when you originally got your VA loan and you certified that you intended to occupy or currently occupied the home.
Please note:
- No other loan besides your current VA loan may be paid off by the proceeds of an IRRRL. The holder of your secondary loan will need to agree to subordinate that lien in order for your first mortgage to be your VA loan.
- You are not required to have a Certificate of Eligibility. However, if you do happen to have one, it can speed up the process if you show it to Village Capital & Investment LLC to establish prior use of your entitlement.
- It is possible that you used your entitlement when obtaining your VA when you bought your home. Also, by substituting your eligibility for that of the seller, if the loan was assumed.
- The new loan may not exceed the sum of the outstanding balance on the existing VA loan.
Loan Limits
There is not a set cap on how much VA will allow you to borrower to finance your home. There is, however, limits on the liability amount in which VA can assume. This limit on the amount of liability is what typically affects the dollar amount that a lender will lend to you. The loan limits are the amount a qualified Veteran with full entitlement may be allowed to borrower without making a down payment.
The entitlement that is generally available to an eligible veteran is $36,000. If the Veteran is income and credit qualified, and the property appraises for the asking price, lenders will usually loan up to four times a Veteran’s available entitlement without a down payment.
Reducing the term of your loan from 30 years to 15 years
Lenders will use an IRRRL as an opportunity for a borrower to reduce their loan term from 30 years to 15 years. This can be both good and bad, and the borrower must use caution when exercising this eligibility. It is true that you will save a ton of money over the life of the loan in interest when reducing the loan term by 15 years, however, if the interest rate isn’t lowered by at least 1 percent, and sometimes 2, it is possible that your new monthly payment is outside of your budget and you may be unable to afford the payment. Be sure to talk to go over all of your options with your loan officer.
VA Funding Fee
The VA funding fee is a small percentage of the loan amount which will vary based off of the type of loan you have as well as:
- Your military category
- If you are a first time or subsequent loan user
- Whether you make a down payment or not
You maintain the option to either finance the VA funding fee or pay it with cash. However, the funding fee is required to be paid at closing. You are considered exempt from the funding fee if you meet one of the following requirements:
- You are a surviving spouse of a Veteran who died while in service or from a service related disability.
- Veteran who would be entitled to receive compensation for a service related disability if you were not receiving retirement or active duty pay.
- Veteran who is receiving VA compensation due to a service related disability.
VA IRRRL Program Guidelines
- No 30 day lates. You must be current on your mortgage within the last 1 months. If you have a 30 day late in the last year, then you must wait to refinance.
- Lower Payment. Veteran’s affairs dictates you must have a lower monthly payment on your VA loan as a result of the IRRRL program unless you are switching from an adjustable rate mortgage to a fixed rate mortgage.
- No Cash Out. You are not allowed to get any cash from an IRRRL. If you are looking for cash-out options please refer to the cash-out refinance.
- Previous Occupation. You do not have to live on the property in order to refinance it, but you do have to prove you occupied the home at one time.
- VA to Va Loan. You have to have already used your eligibility for a VA loan on the property that is being refinanced.
- No VA Loan Limit. There’s no limit to the amount o you can borrow in order to finance a home purchase. most lenders will look at the amount of your entitlement, and loan up to four time that amount.
If you’re ready to take advantage of the interest rate reduction refinance loan program, then use the button below to contact one of our licensed loan officers.
The products or services described in this website do not originate from the Federal Housing Administration (FHA) or any other government agency. Village Capital & Investment LLC is not affiliated with your current lender and any loan information presented was not obtained from your current lender. Estimated payment is for a 30 year fixed rate loan and does not include taxes and insurance. These products may have higher interest rates, more points, or more fees than products requiring documentation. Only loans with no 30 day late payments in the past year accepted. Village Capital & Investment LLC NMLS ID: 3317 Arizona Mortgage Banker License No. 0909593.