If you have a VA-backed home loan and are looking to reduce your monthly mortgage payments or make them more stable, an Interest Rate Reduction Refinance Loan (IRRRL) might be a great option for you. Refinancing with an IRRRL allows you to replace your current loan with a new one under more favorable terms. Here’s a comprehensive guide to help you understand IRRRLs and determine if they are right for you.
Am I Eligible for an IRRRL?
To qualify for an IRRRL, you must meet the following criteria:
- You already have a VA-backed home loan.
- You are refinancing your existing VA-backed home loan with the IRRRL.
- You can certify that you currently live in or previously lived in the home covered by the loan.
Note: If you have a second mortgage on the home, the holder must agree to make your new VA-backed loan the first mortgage.
Why Consider an IRRRL?
Often referred to as a “streamline” refinance, an IRRRL can offer several benefits:
- Lower Monthly Payments: An IRRRL can help reduce your monthly mortgage payments by securing a lower interest rate.
- Stable Payments: It can also stabilize your payments by moving from an adjustable or variable interest rate to a fixed rate, which remains the same throughout the loan term.
You can borrow up to the Fannie Mae/Freddie Mac conforming loan limit in most areas on a no-down-payment loan, with higher limits in some high-cost counties. If you choose to make a down payment, you can borrow more.
Be mindful of closing costs, which can add up to thousands of dollars. Before deciding to refinance, calculate if the monthly savings outweigh these costs. Consult with your lender to fully understand the costs and benefits.
How to Get an IRRRL
- Find a Lender: You’ll need to work with a private bank, mortgage company, or credit union—not directly through the VA. Terms and fees can vary, so it’s wise to contact multiple lenders to explore your options. Be cautious of offers that seem too good to be true, such as promises of skipped payments or unusually low interest rates.
- Provide Necessary Information: If you have the Certificate of Eligibility (COE) from your original VA-backed loan, provide it to your lender. If not, request that your lender obtain your COE electronically through the VA Home Loan program portal.
- Complete the Process: Follow your lender’s steps to close the IRRRL loan and pay any associated closing costs. You may need to cover the VA funding fee, which helps reduce the loan’s cost for U.S. taxpayers. Your lender will also charge interest and other fees. You can include these costs in the new loan or opt for a higher interest rate to cover them.
For more information or to check if you’re eligible, visit vafastloans.com.