VA Refinance: Interest Rate Reduction Refinance Loan
President Lincoln famously said: “Honor to the soldier and sailor everywhere, who bravely bears his country’s cause. Honor, also, to the citizen who cares for his brother in the field and serves, as he best can, the same cause.”
We can never fully repay our Veterans, however, one of the ways our country tries to show its appreciation is through VA loans. These loans are a specialized class of home loans backed by the Department of Veterans Affairs. Qualified Veterans have access to features that include eliminating mortgage insurance requirements, debt-to-income ratios similar to FHA Loans and reduced or no down payment options.
Can You Refinance a VA Loan?
Yes, VA-backed loan products are available for refinancing. These loans can offer quicker turnarounds because they are not dependent on the open appraisal market. They are also ordered through the VA which may save time compared to a standard loan.
Let’s take a closer look at a few ways that we are helping many Veterans save money on their monthly payments or putting their mortgage to work by providing them access to cash.
What is a VA IRRRL (Interest Rate Reduction Refinance Loan)?
The VA IRRRL is a mortgage refinance option for qualified VA borrowers that have an existing VA loan. The IRRRL allows Veterans to refinance to a new VA loan with a lower interest rate or convert a VA loan from an adjustable to a fixed rate.
It's also known as a “VA Streamline” because there’s often less paperwork involved resulting in quicker turnaround times.
VA Streamline Refinance (IRRRL) Requirements
The IRRL is not available to Veterans with non-VA loans. However, if you have a VA loan and can certify that you live in the home you may be eligible for a VA IRRRL.
Lenders may also have guidelines and requirements regarding how long you've had your current mortgage.
- Specific guidelines and policies on credit scores, appraisals, loan-to-value ratio, and loan payment history can vary by lender. Additionally, part of the application process involves verifying how many payments have already been made as well as timeframes on recovering the costs and fees associated with the new loan.
VA Streamline Refinance (IRRRL) Benefits
There are several advantages to doing an IRRRL aka VA Streamline Refinance. These include little to no out-of-pocket costs and in most cases no VA appraisal. The VA funding fee is lower on IRRRLs than for typical VA purchase and cash-out loans, and some Veterans choose to exercise their option to avoid out-of-pocket costs by rolling the closing costs and fees into the loan balance.
Unlike VA home purchase loans where you need to intend to occupy the property as your primary residence, that is not the case with a VA Streamline Refinance.
What is a VA Cash-Out Refinance?
The VA Cash-Out refinance loan replaces your existing mortgage. It gives qualified veterans the opportunity to refinance their conventional or VA loan at a lower rate while turning the equity in your home into cash. Equity is the difference between what you owe on your mortgage and your home's current value.
A VA cash-out refinance encompasses both a VA Rate and Term Refi as well as a Cash-out Refi.
VA Cash-Out Requirements
As with a standard VA loan, borrowers must meet credit, income, and appraisal guidelines. Minimum credit scores are also required though vary based on the lender, the loan amount, and other factors. Additionally, you must certify that you intend to occupy the property being refinanced.
Homeowners can finance their closing costs or VA Funding Fee provided they meet lender loan-to-value guidelines
Benefits of a VA Cash-Out Refinance
Many Veterans use the extra cash for eliminating debt, making home improvements, paying for college, or even investing. Homeowners often choose the VA cash-out refinance option because it offers the ability to repay the loan over a longer period.
