What Is a VA IRRRL Streamline Refinance? Guide for Homeowners
Key Takeaways
- Eligible homeowners can use VA IRRRLs to refinance an existing VA loan into one with a lower rate, lower payment, or from an adjustable rate to a fixed rate. By refinancing, the total finance charges may be higher over the life of the loan.
- A VA streamline refinance typically has a faster and simpler process than other refinance loans.
- Borrowers must meet VA requirements, including eligibility, loan seasoning, on-time payments, and a clear demonstrated financial benefit from refinancing.
- While IRRRLs can reduce monthly payments, extending the loan term may increase total finance charges and interest paid over time.
Refinancing a home loan can often help homeowners secure better terms, including a lower mortgage rate and a more affordable monthly payment. One unique refinancing option for eligible Department of Veterans Affairs (VA) mortgage customers is the VA Interest Rate Reduction Refinance Loan (IRRRL), also called a VA streamline refinance.
Let’s explore what a VA IRRRL is and how it works.
What Is a VA IRRRL?
A VA IRRRL is a government-backed loan that allows eligible homeowners to replace their existing VA home loan with a new one that offers more desirable terms. These improved terms can include a lower mortgage rate or monthly payment, or a change from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
VA IRRRL loans are referred to as streamline refinances because you can refinance in a faster, less expensive, simpler way than you can with other loan types. However, unlike with VA cash-out refinances and conventional cash-out refinances, you can’t borrow cash from your home’s equity with an IRRRL refinance.
How Does a VA Streamline Refinance Work?
The VA IRRRL refinance process is typically faster and involves less documentation than other types of refinance loans. This is because VA IRRRLs simplify some steps of standard mortgage refinancing, such as minimal paperwork and no required appraisal or credit check in most cases.
Additionally, depending on your lender’s requirements, a VA IRRRL may still be available even if your home’s value has declined or your financial situation has changed. However, there are specific qualifying requirements.
VA IRRRL Requirements
To qualify for a VA streamline refinance, the VA requires that the following conditions be met:
- Your existing mortgage is a VA loan.
- The IRRRL is used to refinance your existing VA-backed home loan.
- You have certified proof that you currently use (or previously used) the home as your primary residence.
Other requirements include:
- Mortgage payments must be up to date.
- Current VA loan must be "seasoned," meaning you've made at least six consecutive on-time monthly payments, and at least 210 days have passed since the date of your first mortgage payment.
- You meet the lender’s specific credit score requirements (if any).
- You gain a net-tangible benefit, meaning the IRRRL will result in a clear financial benefit, such as a lower mortgage payment or interest rate.
Depending on your lender, or if you have a second mortgage on the property you’re refinancing, there may be additional requirements.
VA Streamline Example
To better understand how a VA IRRRL works, here’s an example of how it might look in a real-world scenario:
You’re a Navy Veteran looking to refinance your mortgage in the state of Indiana. Your current 30-year fixed VA loan has a balance of $310,000 at 6.5% interest, meaning your monthly principal and interest payment is about $1,896.20. Mortgage rates drop to about 5%, and you contact Freedom Mortgage to see if you can take advantage of the rate drop. By refinancing through a VA IRRRL to a 5% interest rate, your monthly mortgage payment drops to about $1,610.46—saving you about $285.74 each month ($2,856 annually). You also rolled the $1,250 reduced VA funding fee and about $3,000 in other closing costs into the new loan, so you didn’t have to pay anything out-of-pocket.*
Current Loan Starting Balance: $300,000
Rate: 6.50%
Payment: $1896.20
New loan: $310,000
Rate: 5.00%
APR: 5.116%
Term: 30 year
Average Points: $2,220 or 0.74%
Average Prepaids: $1,705
Total Prepaids: $3,925
Payment: $1,610.46
Monthly Savings: $285.74
Curious how a VA IRRRL might benefit you specifically? Check out how much you can save with our VA loan refinance calculator.
VA IRRRL Benefits
If you’re a Veteran, active-duty service member, eligible surviving spouse, or qualifying member in the National Guard or U.S. Armed Forces Reserves, using a VA IRRRL as a refinance option could help you benefit in several ways:
- Enjoy lower interest rates and a lower monthly payment
- The ability to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage
- A lower VA funding fee (only 0.5%, compared to the standard 2.15%–3.3% on a normal VA refinance)
- No appraisal requirement (in most cases)
It’s important to note that even if a VA streamline refinance helps you reduce your monthly payment, you could end up paying more in finance charges over the life of the loan because you’re extending your loan term. Make sure you clearly understand your total cost before you move forward with a VA IRRRL.
Some lenders might allow you to keep your current loan term with a VA streamline refinance. So, for example, if you only have 13 years left on your current VA mortgage, you may be able to refinance to a new VA mortgage with a 13-year term.
Lower Your Rate and Payment
Ask us if today’s rates can help you lower your payment. We offer fast, easy refinancing for VA loans with the VA streamline program.
Get Started
How Much Does a VA IRRRL Cost?
While VA IRRRLs can offer you money-saving benefits, the loans come with refinance costs that you should be aware of.
VA Funding Fee
You’ll have to pay the VA funding fee, which helps the VA fund the VA loan program and ensure its sustainability, just like you did when you first purchased your home with a VA home loan. The good news is that for IRRRLs, the funding fee is only 0.5% of the loan amount, unlike for VA cash out refinance loans, which can range from 2.15% (for first use) to 3.3% (for subsequent uses).
Most commonly, VA funding fees can be rolled into your loan amount and paid over time, rather than at closing. Alternatively, you may pay it in full at closing, use seller concessions (if you’re buying a home), or offset it with lender credits, depending on your circumstances.
Veterans and service members recognized by the VA as disabled and receiving disability compensation are exempt from paying the funding fee. Some surviving spouses may also be exempt. Freedom Mortgage will help you determine your eligibility for a VA funding fee waiver.
VA IRRRL Closing Costs
Closing costs and fees for VA IRRRLs include loan origination fees, title insurance, property taxes, and homeowners insurance. Closing costs are usually lower for a VA streamline refinance than with other types of home loans, but this is not guaranteed.
How Many Times Can You Do a VA Streamline Refinance?
There’s no limit to how many times you can refinance with a VA IRRRL, providing you complete the necessary waiting period between each mortgage refinance, and you can demonstrate you’ll benefit from refinancing.
How To Apply for a VA IRRRL
Applying for a VA streamline refinance is faster and simpler than the conventional refinance process. Here’s a step-by-step guide to help you understand how the process works:
1. Check Your Eligibility
Verify your current mortgage is a VA loan and that you meet the VA's seasoning requirement (at least six consecutive on-time payments and, usually, at least 210 days since the due date for the first mortgage payment on your VA loan being refinanced).
Again, to qualify as an IRRRL, the refinance must also result in a financial benefit for you, such as a lower monthly payment or switching from an ARM to a fixed-rate loan.
2. Browse and Compare Lenders
Many mortgage lenders offer VA IRRRLs, so you don't have to use the same lender that originated your current VA loan.
To find the best loan terms, you’ll want to get quotes from multiple lenders to compare interest rates, closing costs, and any other fees. Freedom Mortgage is confident and ready to give you an affordable, helpful, smooth, and transparent refinance experience.
3. Submit Your Application
After you’ve chosen your lender, you’ll need to complete the loan application. This will involve providing any required documents, but not nearly as many as you provided when applying for your existing VA loan.
You may need to verify your Certificate of Eligibility (COE), which Freedom Mortgage can help you do, but you typically don’t need to include income documentation or get an appraisal.
4. Close and Enjoy Your New Loan Terms
After being approved, you’ll review and sign your closing documents. If you’re rolling your closing costs into the new loan, you likely won’t need to bring any cash to the closing table.
After closing, you’ll begin making payments on your new VA IRRRL loan—ideally with a lower interest rate and monthly payment, or a shorter loan term.
Final Thoughts: Is a VA IRRRL Right for You?
A VA IRRRL could be a great choice if you’d like to lower your monthly mortgage payment so you can focus on saving money (or your other financial goals). Plus, the VA streamline refinance process is less complicated and time-consuming than most other home loan processes. If you’re interested in benefitting from a VA IRRRL, get started today.
*This example is for illustrative purposes only. Actual rates, APR, terms, and payments will vary based on a borrower’s specific circumstances. This is not an offer or commitment to lend.
By refinancing, the total finance charges may be higher over the life of the loan.
Freedom Mortgage Corporation is not, nor is it affiliated with, any governmental agency or organization. This article is for informational purposes only. Not a commitment to lend. Loans subject to VA eligibility, credit approval and property requirements. We do not provide legal, tax, or investment advice.
Victoria Araj is the Senior Director, Managing Editor at Freedom Mortgage. In her 20 years of working for top mortgage lenders, she’s held roles in mortgage banking, public relations, editorial content, and more. She has a bachelor’s degree in Journalism with an emphasis in Political Science from Michigan State University, and a master’s degree in Public Administration from the University of Michigan. She has spoken at several industry conferences, where she’s discussed the importance of editorial content for brands.
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