What Is a VA IRRRL and How Does It Work?

With mortgage rates so low, many homeowners have chosen to refinance in the last year. Doing so can reduce not only the long-term costs of your loan but also your monthly payment too.

If you have a VA loan, your best bet for refinancing is an IRRRL — or Interest Rate Reduction Refinance Loan.

These loans are specifically designed for VA borrowers looking to reduce their interest rate or move to a fixed-rate loan from an adjustable-rate mortgage.

Do you fall into one of those two categories? Here’s what you need to know about the IRRRL option.

What is the VA IRRRL?

The VA IRRRL is a refinancing option for VA borrowers. To use it, you need to have an existing VA loan for a home that you’re either living in now or used to live in. You’ll also need to meet the service requirements of the VA program.

As with any mortgage loan, VA IRRRLs do come with some closing costs. This includes a funding fee of 0.5% of the total loan amount.

A quick note here: VA IRRRLs are only for changing the interest rate on a VA loan. They cannot be used to cash in home equity. To do this, you’d need the VA’s cash-out refinance loan.

Benefits of IRRRLs

VA IRRRLs are often called “streamline” refinances, as they come with less red tape than most refinancing options. There’s no credit check (and no maximum debt-to-income ratio) required, and you don’t need to take any sort of homeownership course either. 

You can also finance your closing costs — meaning roll them into the new loan balance. This can help make refinancing more affordable (at least up front). 

Getting a VA IRRRL

To apply for a VA IRRRL, you’ll need to go through a VA-approved lender like Embrace. (Not all mortgage lenders are able to offer VA loans, so choose wisely). 

You’ll also need your Certificate of Eligibility — or COE — from the Department of Veterans Affairs. You can apply for this directly through your eBenefits portal or ask your lender to pull it on your behalf.

Finally, fill out the lender’s full application and provide any documentation that might be required. There shouldn’t be much on IRRRLs, but you will need a little.

Considering a VA IRRRL?

If you’re thinking about refinancing your VA loan, get in touch with an Embrace Home Loans office in your area today. We’ll walk you through your best options.