An IRRRL is a VA-guaranteed loan made to refinance an existing VA loan, generally lowering the current interest rate resulting in lower principal and interest payments than the existing VA loan. Generally, no appraisal, credit information or underwriting is required.
An IRRRL (which can be a fixed rate, hybrid Adjustable Rate Mortgage (ARM) or traditional ARM) must result in a lower interest rate than the loan it is refinancing unless the loan it is refinancing out of is an ARM.
The principal and interest payment on an IRRRL must be less than the principal and interest payment on the loan being refinanced unless one of the following exceptions applies:
- the IRRRL is refinancing out of an ARM
- The term of the IRRRL is shorter than the term of the loan being refinanced Example from a 30 year fixed to a 15 year fixed, or
- energy efficiency improvements are included in the IRRRL.
A significant increase in the veteran’s monthly payment may occur with any of these three exceptions, especially if combined with one or more of the following:
- financing of closing costs,
- financing of up to two discount points,
- financing of the funding fee, and/or higher interest rate when an ARM is being refinanced.
No Cash Out –
An IRRRL cannot be used to take equity out of the property or pay off debts, other than the VA loan being refinanced. Loan proceeds may only be applied to paying off the existing VA loan and to cover the costs of getting the IRRRL.
There is one exception which is reimbursement of the veteran for the cost of energy efficiency improvements up to $6,000 completed within the 90 days after loan closing.
For more information on VA home loans visit my VA Resources Center
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Nevin ~ I'm printing this to share with my fellow office mates -- great information; thanks.
Tish - Anytime! Visit my VA Resource center for more info. I have plenty more that I will be adding to it soon.
Hi Nevin - Sounds like a great program for those who have had their VA loans for awhile - and a great way to finance energy upgrades as well.
Wow! They have loans that don’t require appraisals or credit information? Sounds like the old days with appraisers never leaving their homes to do an appraiser and those pesky liar loans.
Susan - The VA loan is one of the most flexible loans in the iundustry
Jim - This has always been the case with VA streamline refinances. FHA used to do the same but now they require proof of income but still no appraisal.