A great way to reduce your monthly mortgage payments or stabilize your mortgage loan is by refinancing. If you are currently a service member or veteran with a VA-backed home loan, you might be interested in obtaining an Interest Rate Reduction Refinance Loan or IRRRL. Lenders and Borrowers both like the IRRRL because of the ease of refinancing, mainly because the borrower doesn’t have to go through the standard VA lender underwriting process and the home doesn’t require an appraisal.
The IRRRL saves time, money/fees and paperwork and is often called a “VA streamline refinance” due to the process being so simplified. Refinancing your VA Mortgage with an IRRRL allows you to improve your current VA loan by replacing it with a new one, under different terms which will allow you to lower your monthly payment by requiring an interest rate reduction. The VA requires that a refinance must offer the veteran a Net Tangible Benefit, which means an IRRRL is truly financially benefitting our veterans through a reduced monthly payment.
Can I Use A VA IRRRL To Change My Adjustable Rate Mortgage (Arm) To A Fixed Rate?
The IRRRL can be used for an existing VA loan with an adjustable rate that is refinanced into a fixed-rate loan. This allows you to lock in a rate for the life of the loan and never have to worry about the mortgage rate changing in the future. The only time the VA will allow the borrower to increase your mortgage interest rate on a refinance is when you move from an ARM to a fixed-rate loan. If you’re looking for a shorter loan term, changing your loan from a 30-year to a 15-year loan is possible, too. Your payment will be higher, but the amount of interest saved over the life of the loan might be worth it to you. Work with your lender to see if a higher monthly mortgage payment will work within your budget.
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Can I Get Cash-Out With An IRRRL?
Unfortunately, there aren’t any cash-out options with an IRRRL, however, there is an exception of up to $6,000 in the case for energy-efficient improvements. The lender may require you to prove the upgrades will provide an actual return on the investment by having an energy audit of your home.
Are There Any IRRRL Restrictions Or Requirements?
If you qualify to refinance a VA mortgage using the IRRRL, there are fewer restrictions on how you can use it. If you’ve already used your VA Loan benefit, you can use the IRRRL to refinance your loan. You will still need to prove eligibility by providing the Certificate of Eligibility or COE, however, your lender can pull your COE for you. The IRRRL can also be used to refinance a house even if you’re not occupying it at the time of the refi. As long as you can certify that you did live there previously, you’re eligible to use the IRRRL.
How Much Does It Cost To Refinance A VA Mortgage Using A VA IRRRL?
The VA funding fee is still required when you refinance a VA mortgage using the VA streamline refinance option and is typically a 0.5% charge for most borrowers. As with the VA loan, the funding fee is waived for certain borrowers with service-connected disabilities, as well as certain surviving spouses. The IRRRL can be done without any money “out of pocket” by adjusting the interest rate high enough to allow the lender to pay the closing costs or by including all the costs into the new loan. Since both the interest rates and amount of closing costs may vary from one lender to the next, it’s best to contact your Aligned Mortgage Loan Officer for more information.
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