VA Streamline Refinance (IRRRL) Loan

VA loans are one of the most valuable benefits available to eligible service members and veterans. Backed by the Department of Veterans Affairs, VA loans make it possible to purchase a home with no down payment, competitive interest rates, and flexible loan qualifications. 

Today, we’ll delve into an essential tool within the VA loan arsenal—the VA IRRRL (or “earl”) loan. 

What Is a VA Streamline Refinance (IRRRL)? 

A VA Streamline, also known as an Interest Rate Reduction Refinance Loan (IRRRL), is a VA loan option that allows you to cut a lot of red tape when refinancing an existing VA mortgage. A VA IRRRL is known for its quick processing times and limited underwriting requirements. There’s no home appraisal or credit check requirement, and you can roll your closing costs into the loan term, which can mean no upfront costs in some cases.

VA IRRRL Rates Today

How we source rates and rate trends

Your IRRRL rate can vary depending on your credit score and other factors. To get the most accurate number, get pre-approved with a VA-approved lender. 

VA Streamline Refinance (IRRRL) Requirements

When it comes to qualifying for a VA IRRRL, lenders don’t ask for much. Generally, no appraisal is required, you might not need to provide income documentation, and there are no set credit requirements. But do understand that guidelines and requirements can vary by lender.

However, a big caveat of a VA Streamline is that it can only be used for existing VA mortgages. You can’t refinance a conventional, FHA or USDA mortgage using a VA IRRRL.

While there aren’t strict lender requirements, there are VA requirements. Here’s what you need to qualify for a VA IRRRL: 

• You can only refinance VA-to-VA
• The new interest rate and monthly payment must be less than your original loan (except when refinancing an adjustable rate to a fixed interest rate)
• You must confirm that you previously occupied the property
• You must have no more than one 30-day late payment in the past 12 months
  

If you want to refinance another mortgage type to a VA loan, you’ll need to use a VA cash-out refinance loan—and don’t worry, you don’t actually have to take out cash if you don’t want to.

Do you have to pay the funding fee for a VA IRRRL?

As with all VA mortgages, you have to pay the VA funding fee when you take out a VA IRRRL. 

The funding fee is a one-time upfront charge to help finance the loan program for future generations. For a VA IRRRL, the fee is only 0.5% of the loan amount unless you’re exempt. 

Those exempt from paying the VA funding fee include: 

• Veterans receiving compensation for a service-connected disability
• Veterans who are eligible to receive service-connected disability compensation but are currently receiving military retirement or active-duty pay
• Purple Heart recipients 
• Surviving spouses of veterans who died in service or from a service-related disability
  

Your Certificate of Eligibility will state whether you’re exempt or not. 

VA IRRRL Closing Costs

Like other refinance loans, a VA IRRRL comes with closing costs. While an appraisal fee isn’t required, you can expect to pay other typical closing costs like taxes, insurance, and recording fees.

The good news is that you can typically roll your closing costs into your loan amount.

VA Streamline Refinance (IRRRL) Pros and Cons

Here are some pros and cons of the VA IRRRL loan: 

VA IRRRL Pros	VA IRRRL Cons
Ability to lower your mortgage payment	No cash-out options
No appraisal needed	You have to have an existing VA loan
You can refinance your ARM to a fixed interest rate	The current rate must be lower than the rate you have now (unless ARM -> fixed rate)
No credit check requirement	You must be current on your loan payments
You can roll your closing costs into the loan amount	You have to pay the VA funding fee (unless exempt)

It should be noted that the VA Streamline typically allows you to bypass the underwriting process, but there is always a possibility that you will need to provide documentation to your lender. If you’re set on skipping the underwriting process, you can always shop around—another benefit of the IRRRL is that you can apply with any VA-approved lender. 

How to Choose a VA Streamline Refinance (IRRRL) Lender

Any mortgage lender authorized to provide a VA loan can offer a VA IRRRL.

That said, you should consider using a company that is familiar with processing VA loans. The paperwork, requirements, and timelines can differ from conventional VA loans. So, you want to use a company with enough experience that you won’t have errors or delays in your loan processing.

Here are our top 2024 picks for VA lenders. 

When is a VA IRRRL good for me?

A VA IRRRL is excellent when you can lower your:

• Interest rate
• Monthly payments
• Length of your mortgage, or
• If you’re looking to go from an ARM to a fixed-rate loan (this might be worth it, even if there’s a modest increase in your interest rate)
  

Although this will likely happen in a declining interest-rate environment, it is possible to lower your monthly payments or shave a couple of years off your mortgage in a static market.

You should also have a reasonable expectation that you will use the residence until you can break even. The break-even period is the time it takes for the savings from refinancing to offset the costs associated with taking out the refinance. In other words, it’s the point in time when the cumulative savings from a lower monthly payment or reduced interest rate equal the total closing costs paid for the refinance. 

Here are a few situations where an IRRRL may not be worth the cost: 

1. You’re looking to hold the property for less than the break-even period. If you anticipate selling your home in the near future, the cost savings from refinancing may not outweigh the closing costs associated with the VA IRRRL. It typically takes some time to recoup the closing costs through lower monthly payments, so a refinance may not be worth it if you plan to move before that break-even point.

2. You already have a low interest rate: Refinancing may not result in significant savings if your current VA loan has a relatively low interest rate. The potential reduction in interest rate may not be substantial enough to justify the costs associated with the refinance.
   

At the end of the day, you should only refinance if the numbers work. 

If you need guidance, seek out a financial advisor. You can also use a free online refinance calculator to find your break-even point.

VA IRRRL FAQs

What does VA IRRRL mean? 

IRRRL stands for interest rate reduction refinance loan. A VA IRRRL is a streamlined process available for borrowers who currently have a VA mortgage.  

Can I use a VA IRRRL to refinance a 30-year mortgage to a 15-year mortgage?

Yes, it is possible to refinance a 30-year mortgage to a 15-year mortgage with an IRRRL, but the benefits of the refinance must be worthwhile for it to be approved.

How many times can I use a VA IRRRL?

There is no limit on the number of times you can use a VA IRRRL, but you must meet the VA’s requirements each time you apply.

Can I get cash from a VA IRRRL?

The VA IRRRL program does not allow for cash-out refinancing. If you are interested in obtaining cash from your home’s equity, consider applying for a VA cash-out refinance. 

How long do I have to wait to do a VA Streamline?

You can look to close on a VA IRRRL once 210 days have passed since the first monthly payment date of your current VA loan.

What is the VA Refinance Recoupment Period?

The VA requires that the closing costs associated with taking out a VA refinance loan must be recouped within 36 months of closing. To find your recoupment period, divide your estimated monthly savings from refinancing by your total closing cost amount. For example, if your closing costs equal $2,500 and your estimated refinance savings are $250 per month, your recoupment period is 10 (2,500 ÷ 250 = 10). 

Can I use discount points on a VA IRRRL? 

You might be able to use discount points on a VA IRRRL, depending on your lender’s policies. 

Discount points are a form of prepaid interest that you can purchase at closing to lower your mortgage interest rate over the life of the loan. Each point typically costs 1% of the loan amount and can reduce your interest rate by about 0.25%.

For a VA IRRRL, lenders typically allow a maximum of two discount points to be rolled into the loan amount. Any additional points would need to be paid by the borrower upfront.

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