What Is A VA Streamline Refinance?

(Formally known as a VA Interest Rate Reduction Refinance Loan, or IRRRL)

A VA Interest Rate Reduction Refinance Loan (also known as a VA IRRRL or a VA Streamline) is a VA Loan that permits borrowers with an existing VA Loan to refinance with more attractive rates and terms.

It’s ideal for borrowers who’d like to accomplish any of the following:

  • Obtain a lower interest rate and lower monthly payment.
  • Convert an Adjustable Rate Mortgage to a Fixed Rate.
  • Add or remove a co-borrower from your mortgage (there are some restrictions on this).
  • Secure today’s interest rates on a loan you obtained 10 years ago without starting all over (15 and 20 year terms are available).
  • Reduce your term from 30 years to 20 or even 15 years to build equity faster.
  • Improve your terms while also forgoing 1 to 2 direct payments.

What Are The Features Of The VA IRRRL?

  • The VA IRRRL requires less paperwork than a typical mortgage.
  • There is no appraisal requirements.
  • A VA IRRRL is permissible on RENTAL property.
  • The veteran does NOT have to currently occupy the home as long as you have lived there previously.
  • Faster closings (we can typically close an IRRRL in 15 – 19 days).
  • There are no out-of-pocket costs (let’s clarify, there are costs associated with the loan, but they can be added to the new loan amount).
  • On VA IRRRLs the VA Funding Fee is reduced to .50 (one half of one percent).
  • Lifetime interest payments are usually reduced by tens of thousands of dollars.

What Is The Government’s Motivation For Offering The Veteran This Product?

You must understand the policy considerations that undergird the VA IRRRL. If you’ve got a VA Loan with a 4.5% interest rate, and you’re making your payments on time, as agreed, imagine how much stronger you become as a borrower if you could lower your rate to 2.25% and save $440 on your payment. You save money and VA gets a stronger loan on the books. Everyone wins. Since that’s the case, and you’re essentially swapping one VA loan for another that has better rates and terms, VA just makes it easier on the veteran to complete the transaction. Yes, gentle reader, hard to imagine, huh? It’s an excellent product that helps you financially in your day to day lives and the government makes it easy to get.

Okay, So How Much Money Can I Expect To Save with The IRRRL?

That depends on your existing loan amount, along with your current interest rate and term, versus what you can get at today’s rates and terms. For example, let’s assume you bought a home 10 years ago (September of 2011) and obtained a VA 30 year fixed rate of 4.5% on a $400,000 loan. Your monthly principal and interest payment would be $2,026.74 and you’d pay $329,626.85 in interest over the life of the loan. In September of 2021 your son bought a home. He too obtained a $400,000 VA 30 year fixed rate loan, except he received today’s VA rate which is 2.25%. His monthly Principal & Interest payment is $1,528.98 and the interest he’ll pay over the life of the loan is $150,434.39. So for the same loan amount your son’s monthly payment is $497.76 less, and the interest he’ll pay over the life of the loan is $179,192.46 less. The VA IRRRL permits you to refinance into today’s lower interest rate (right now that’s about 2.25%) and enjoy the same terms as your son. And you don’t have to start all over because VA also offers a 20 year loan.

That’s the type of impact a VA IRRRL can have. Each borrower is unique and your scenario will be different. And of course we have to consider the cost of the loan, and perform a break even analysis. But again, this is the potential of the VA IRRRL. See Table 1 Below.

What Are The VA IRRRL Requirements?

  • You must currently have a VA loan.
  • There must be a net tangible benefit to the veteran (it has to make financial sense).
  • Lower the rate or the payment
  • Convert from an Adjustable Rate Loan to a Fixed Rate Loan.
  • Move from a 30 year loan to a 15 or 20 year loan
  • Substantially reduce interest costs over the life of the loan.
  • The current loan must have been on the books for at least 210 days (calculated from the date of the first payment on the existing loan to the closing date of the new loan).
  • You must certify that you currently occupy your home, OR lived there previously. You DO NOT have to assert that you intent to occupy the home in the future.
  • There can be no late payments on your mortgage in the last 12 months.
  • To obtain an IRRRL the minimum credit score requirement set by most of our investors is 620. (This is not a VA requirement, but a lender requirement). If you do not have a 620 score PLEASE call us. If you don’t call, we can’t help. You can also reach out to us online.
  • VA collects a .50 (one half of one percent) Funding Fe on IRRRLs. (The Funding Fee is paid to VA at closing to support the VA Home Loan Program by helping lower the cost of the loan for the U.S. taxpayers). PLEASE NOTE: If you receive compensation for a service-connected disability, you’re exempt from the Funding Fee. In addition, if you’re the spouse of a veteran who died in service, or from a service-related disability, you may also be exempt from the VA Funding Fee.

Can I Get Cash Out With A VA IRRRL?

No. The purpose of the IRRRL is to allow the Veteran to improve their Interest Rate & Term. The only exception is when the Veteran needs cash for verifiable energy reducing home improvements. In that case you can receive as much as $6,000 to pay for the energy improvements. Note that all improvements must be completed within six months of the loan closing. If you’re interested in an Energy Efficient Mortgage learn more below. If you’re interested in a VA Cash Out mortgage learn more below.

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