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An interest rate reduction refinance loan (IRRRL) may be perfect for you if you have an existing VA-backed home loan and wish to lower your monthly mortgage payments or make your payments more consistent. Refinancing also allows you to replace your existing loan with a new one with better conditions. In this article, we’ll discuss VA IRRRL program loan rates and the process.
VA IRRRL Rates
The VA IRRRL program rates are among the most competitive on the market.
Because of the Department of Veterans Affairs’ support, lenders can issue these loans at extremely low-interest rates.
According to our lender network, the current beginning rate for a 30-year VA refinance is 2.5 percent (2.674 percent APR). When you compare that to a conventional loan’s 3.125 percent (3.125 percent APR), you can see that VA IRRRL program rates offer significant savings.
Of course, VA refinance rates differ from one consumer to the next. Depending on the amount of your loan, your credit score, the loan-to-value ratio, and other considerations, your rate will most likely be higher or lower than the national average.
VA IRRRL Loan
An Interest Rate Reduction Refinance Loan (IRRRL) from the Department of Veterans Affairs (VA) can be utilized to refinance an existing VA loan and lower the interest rate.
IRRRLs don’t require credit checks and can cover the whole outstanding balance of a previous loan, including closing expenses and up to two discount points. Please keep in mind that some lenders may have additional credit requirements before approving a loan. As a result, VA advises you to contact many lenders to find the best loan choice for your circumstances.
For Veterans with an existing VA loan, a VA IRRRL is a mortgage refinance alternative. The IRRRL allows homeowners to convert an adjustable-rate VA loan to a fixed-rate VA loan or refinance an existing VA loan to a new VA loan with a lower interest rate. It’s known as a VA streamline because it usually takes less paperwork and moves more quickly than a traditional refinance.
VA IRRRL Program Requirements
The following individuals may be eligible for this refinance loan:
- Members of the Reserve and National Guard (called to active duty)
- Active Duty Military Personnel
- Members of the Reserve and National Guard are currently serving (after six years of creditable service)
- Survivor spouses in some cases
To be eligible, the Veteran/Servicemember must have been discharged for reasons other than dishonorable and must have served for the required amount of time. The Veteran, the Veteran’s spouse, or the Veteran’s dependent child must attest occupancy for the property as a prerequisite for a VA home loan.
Read Also: Cash-out refinance loan explained (+ requirements and tools)
If you financed the property with a VA loan and can demonstrate that you currently or have lived in the home, you may be eligible for a VA IRRRL program. Veterans with non-VA loans are not eligible for the IRRRL. The VA cash-out refinance option is available to veterans with non-VA loans who want to refinance to a VA loan.
Lenders may also have guidelines and regulations about how long you’ve had your present mortgage, how many payments you’ve made, and how long it will take to recuperate the new loan’s charges and fees. Lenders may have different policies and guidelines regarding credit scores, appraisals, loan-to-value ratios, and other issues.
Veterans United now requires homeowners to have made no 30-day late payments on the loan being refinanced in the previous 12 months. Another thing to keep in mind is that the VA streamline refinance just requires previous homeownership. Unlike VA home loans, you do not have to plan to live in the house as your primary residence.
VA Funding Fee
The VA funding fee is a one-time cost that is charged on all purchase and refinance loans. The proceeds from this fee go straight to the Department of Veterans Affairs, where they are used to cover losses on any loans that may default.
The good news is that IRRRLs have a lower VA funding charge than traditional VA purchase and cash-out loans. Borrowers who aren’t exempt pay a funding fee of 0.5 percent on their IRRRL. The VA financing fee can be rolled into the loan balance. Use this calculator to estimate the cost of the VA funding fee.
The financing charge is waived for homeowners who get compensation for a service-connected disability and qualified surviving spouses. Refinancing may result in increased finance charges throughout the life of the loan, so keep that in mind.
Loan Terms for this Program
On all loan categories, veterans can negotiate the interest rate with the lender. Unless the Veteran is exempt owing to disability compensation, he or she must pay a VA funding fee. The funding charge can be paid upfront or added to the loan. The Veteran, the spouse, or the child of an active-duty Servicemember must sign a document stating their purpose to occupy the property. Refinancing a loan with the VA does not require an assessment.
Best VA IRRRL Rates
Rates for VA cash-out refinance loans and Interest Rate Reduction Refinance Loans (IRRRLs), also known as VA streamline loans, are referred to as VA refinance rates. Conventional and FHA loan rates are often higher than VA loan rates.
Active-duty military, veterans, select military spouses, reservists, and National Guard members can apply for a VA loan, which has no down payment and does not require mortgage insurance. The VA loan program, which is backed by the US Department of Veterans Affairs, is designed to assist service members and veterans in enjoying the benefits of homeownership.
Rates for VA IRRRL change on a daily basis depending on market conditions.
Current VA Loan Rates
|VA Loan Type||Interest Rate||APR|
|30-Year VA IRRRL Fixed rate||2.968%||3.027%|
|15-Year VA IRRRL Fixed rate||2.138%||2.243%|
|30-year fixed-rate FHA||2.312%||2.967%|
|30-year fixed-rate VA||2.527%||2.806%|
When refinancing, the difference in rate or terms must be significant enough to provide you with a tangible benefit, such as lower monthly payments or a fixed rate rather than a variable rate. Every VA refinance scenario is unique. Talk to a loan officer about your personal situation so they can run the numbers and help you figure out what makes the most financial sense. For more information on this program, please visit the Home Loans webpage.
Pros and Cons of VA Streamline Refinance
- Reduce your interest rate to save money.
- In the vast majority of cases, you may require no appraisal.
- In most cases, no proof of employment is required.
- There is no requirement for income verification.
- There is no requirement for a minimum FICO score.
- Change the terms of your loan
- Close times are shorter.
- Mortgage payments might be deferred for two months.
- Keep your escrow refund in most cases.
- There is no payment due at the time of closing.
- There is an insufficient net tangible benefit.
- There is no cashback, but if you want to tap into the equity in your house, you might want to pursue the VA cash-out refinance option.
- Closing costs are a part of any loan.
Frequently Asked Question
What's a VA Irrrl?
The Interest Rate Reduction Refinance Loan (IRRRL) from the United States Department of Veterans Affairs (VA) decreases the interest rate on an existing VA home loan. The monthly mortgage payment should be reduced by obtaining a lower interest rate.
Is it worth doing a VA Irrrl?
Lenders are more likely to approve a VA IRRRL if it will benefit you financially. This may result in a lower interest rate or monthly payment. You might also refinance from an adjustable to a fixed rate, which could help you budget better and make payments on time.
How much does VA Irrrl cost?
You may be required to pay closing costs for IRRRLs. However, when refinancing, the VA funding charge is substantially lower than when purchasing a property. With an IRRRL refinance, you only have to pay 0.5 percent of the loan amount.