You Can Roll In Your Closing Costs
The only downside that comes with a VA loan is its closing fees. Ideally, you cannot roll this fee into your monthly mortgage payment. Further, if you decide to refinance a FHA loan, you will still be expected to pay the fees upfront.
However, in the case of an IRRRL, you can roll in the closing fees with your monthly payments. This means that you dont need to save thousands to cover up the closing fees, making the entire application process not only convenient but also affordable.
Is A Va Streamline Refinance Right For Me
Here are some scenarios where a VA streamline refinance can be a smart move:
- When you want to lower your monthly payments If you find IRRRL offers with a lower interest rate than one you currently have, you can reduce your monthly bill and interest paid.
- If you currently have an adjustable-rate mortgage If your existing VA loan has a variable rate, your monthly bill can increase when that rate rises. An IRRRL can help you lock in a fixed rate. Rates have been on the rise so far in 2022, so you might want to consider acting fast before they increase more.
- If youre thinking about keeping your property as a form of income Getting an IRRRL only requires that you used to live in the home you can move out and rent out the place and still refinance the loan. A lower interest rate can go a long way toward making the property profitable.
Va Irrrl Streamline Refinance Cons
There are some costs and limits to a VA Streamline to consider.
You Must Be Current On Your Mortgage
You must be current on your mortgage payments. This means that you cant be more than 30 days late on a payment in the last 6 or 12 months depending on how you qualify.
Its Only Applicable To Your Current Property
As we discussed above, only service members or qualifying surviving spouses with current VA loans can take advantage of a VA IRRRL and that refinance is only applicable to the loan on your current home. You may change mortgage lenders or your mortgage specifics, not your actual property. This means you cant switch this loan into a new property it must be refinanced into the property you purchased with the VA loan youre now refinancing.
Strict Eligibility Requirements
To qualify for a VA Streamline, you must have a VA loan to begin with. Youll need to be in good standing with your lender, current on your mortgage payments and be able to prove that the refinance will lower your interest rate. Some borrowers may not be able to meet these requirements.
With closing costs also comes VA IRRRL funding fees. A borrower can choose to roll over these costs into their new loan balance, which means theyll still be paying for them with interest on top.
Recommended Reading: Best Place To Apply For Ppp Loan
Va Streamline Refinance Vs Va Cash
Generally, homeowners are not allowed to get cash back with the VA IRRRL program. Theres just one exception: IRRRL users may get up to $6,000 cash-back if they plan to use it for energy-efficient home improvements.
For everyone else, there is a VA cash-out refinance loan.
A cash-out refinance allows borrowers to refinance their existing loan into a lower rate while also taking cash from the homes value. This replaces your existing mortgage, instead of simply withdrawing cash like a home equity loan.
A qualified borrower can refinance up to 100 percent of the homes value using a VA loan in some cases. Another benefit is that the VA cash-out refinance can be used regardless of your current loan type whether VA, USDA, FHA, or conventional.
Just like the VA Streamline Refinance loan, the home must be used as a principal dwelling by the owner. There is no set period of time that you must have owned your home, however, you must have enough equity to qualify for the loan.
Pay More Each Month And Enjoy The Same Savings
Another thing you can do to save money without a mortgage refinance is to simply pay more each month, assuming youve got the cash on hand to do so.
This is yet another reason to set aside cash for a rainy day, or simply to better manage your debt when its favorable to do so.
The more you pay above what you owe each month, the more youll save over the course of your mortgage term, regardless of your interest rate.
In short, extra payments, such as biweekly ones or simply an additional payment each year, lower the amount of interest you pay.
While your mortgage rate wont change, nor your minimum monthly payment, the amount of interest paid will, which is basically the same deal as a refinance without all the paperwork and qualifying.
Read Also: How To Increase Loan Amount
Va Irrrls: Things To Remember
The VA loan rules for Interest Rate Reduction Refinance Loans require no appraisal or credit check except under specific circumstances such as the amount of the loan being increased beyond a certain amount.
The extras in your mortgage loan may include certain approved closing costs, and certain add-ons such as the VA Energy Efficient Mortgage add-on for approved energy saving upgrades to the home. If the amount of your mortgage goes up too much with such add-ons, the lender will be required to do a credit check.
It is also crucial to remember that your lender may require an appraisal or credit check regardless depending on lender requirements, state law, and/or other variables.
VA IRRRLs may be permitted as no-cost loans, which means no money is paid by the borrower up front. All costs would be rolled into the mortgage and the lender may charge a different interest rate to offset some costs.
The VA official site reminds borrowers that when refinancing from an adjustable rate mortgage into a fixed rate loan, the interest rate may be higher on the new loan this is permitted. The interest rate becoming fixed is viewed by the VA as the tangible benefit in such cases.
Remember, participating VA lenders are not required to issue VA IRRRLs, but any participating lender can process your IRRRL and you do NOT need to keep the same lender in order to apply for this Interest Rate Reduction Refinance Loan.
Persons who may qualify for this refinance loan include:
How The Va Irrrl Works
Like any mortgage refinance, the VA IRRRL program replaces your existing mortgage with a new loan. The new loan starts fresh at 30 or 15 years, depending on which loan term you choose.
But the process for a VA Streamline Refinance is a little different from a traditional refi.
Because theres no income, employment, or credit verification required, borrowers have less paperwork to handle. And you dont need a new Certificate of Eligibility , because the IRRRL can only be used on an existing VA loan. So the lender already knows youre VA-eligible.
Finally, theres no home appraisal. This can shave a week or more off your loans underwriting time so VA Streamline loans typically close faster than other refinances.
You May Like: What Is The Cheapest Personal Loan
Contact A Home Loan Expert
Its helpful to talk to an expert if you decide that a VA Streamline is right for you. Rocket Mortgage has Home Loan Experts who are ready to talk you through a VA Streamline with your specific financial profile.
Have you found that you dont qualify for a VA Streamline refinance and want to know your options? A Rocket Mortgage Home Loan Expert can help with that, too.
Special Considerations For An Interest Rate Reduction Refinance Loan
Unlike other federal loans, no monthly mortgage insurance is required on an IRRRL. However, these loans do carry funding fees these vary depending on the loan, but are generally around 0.5%. Borrowers can forgo paying the fees up-front by rolling the processing costs into the loan amount or by accepting a higher interest rate.
The loan being refinanced must be the first mortgage on the property. If the homeowner has another mortgage that is not a VA loan, they and the lender must agree to make it a subordinated lien , so that the new IRRRL will be the first mortgage. That way, if the borrower defaults, this loan is paid only after the VA loan’s creditor recoups.
Recommended Reading: How To Use Land As Equity For Construction Loan
How To Get A Va Irrrl
To get an IRRRL, you wont go through the VA. Instead, youll need to compare options at banks, credit unions and other VA lenders. VA refinance rates can vary between lenders.
Once youve settled on a lender, youll need to prove that you are eligible for the VAs home loan program like you did for your original mortgage. You might need to track down your Certificate of Eligibility through the VA to do this.
Then, youll sort through the closing details and determine if youll pay those closing costs or include them in the final loan amount.
It Comes With Easy Occupancy Requirements
To qualify for an IRRRL, you need to prove that you have previously lived in the house or currently live in it. This can be convenient for service members who receive PCS. Getting approved for an IRRRL can help them not have to sell the property. Through IRRRL, they can rent the property, helping them earn additional income.
Read Also: Can Dependents Get Va Loan
Use A Second Mortgage To Pay Off The First
One final trick some folks use to reduce their mortgage interest expense is opening a second mortgage to pay off the first.
This way they dont need to refinance, which can be a bit more involved than taking out a second.
Its basically a form of arbitrage where interest rates are lower on the second than the first for one reason or another.
For example, if the interest rate on your first mortgage is well above going rates today, it could make sense.
This can be done with either a fixed-rate home equity loan or adjustable-rate HELOC. But it takes a bit of tinkering and money management skills to get it done.
So in the end, you might just be better off refinancing your mortgage or sticking to some of the alternatives discussed above.
How Does A Va Irrrl Work
A VA IRRRL is also known as a VA streamline refinance, which is a nod to the fact that the process for this loan is much easier than you might encounter with other refinancing options. Thats because an IRRRL doesnt require an appraisal or a credit underwriting package, meaning you can likely still get approved even if your credit score or financial situation has worsened since you initially took out your VA loan.
This type of refinance also lets you finance your closing costs and VA funding fee with the new loan, which can help you refinance without paying anything out of pocket upfront. Keep in mind, though, that if you do wrap those costs into the loan, you will still pay for them just over an extended period of time as they accrue additional interest charges.
Also Check: How Much Do Commercial Loan Officers Make
How We Make Money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout lifes financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
Were transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
The Va Streamline Refinance Process
While the loans are backed by the VA, borrowers still must get the loan from a bank, credit union or other lender. The process is similar to that of applying for a mortgage or traditional refinancing, only with fewer bells and whistles. In short, it includes finding a lender, getting your information together and closing on the loan.
Also Check: How To Pay My Student Loans
Must Also Benefit Financially From The Refinance
Your lender will have to certify that youre benefiting financially from refinancing your VA loan. That means that the savings youre getting either through a lower interest rate or a more manageable monthly payment justifies the closing costs youll pay. This requirement protects VA borrowers from unscrupulous lenders who make their money through various mortgage scams.
Are You Eligible For An Irrrl
To establish your eligibility for a streamlined refinance loan, you must meet the following requirements:
- If an IRRRL is not reducing your monthly income, you might not qualify.
- Have an ongoing VA loan.
- Have been paying the current VA loan for about six months.
- Making up-to-date payments for the ongoing VA mortgage.
- Have a minimum credit score of 620.
- Have previously lived in the house or currently reside in the house.
Don’t Miss: What Is Secured And Unsecured Loan
It Has A Smooth Application Procedure
Getting approved for a streamlined refinance takes about 10-15 days, which is extremely fast compared to an average loan that takes up to 35-40 days. Further, for an IRRRL, you dont need to verify assets, employment, or income.
The thing that borrowers dread the most is the VA loan appraisal. However, in the case of a VA IRRRL, you dont need to go through a loan appraisal which saves both time and money.
Va Streamline Refinance Vs Cash
The VA offers two types of refinancing the VA IRRL and VA Cash-Out Refinance loan.
A cash-out refinance is when a borrower takes out a new mortgage and gets money back based on the equity in their home. Equity is what the home is worth compared to whats owed. For instance, if you owe $100,000 on your mortgage, but your home is appraised at $150,000, you have $50,000 in equity. A cash-out refinance is a new mortgage that pays the old one, with money left over that the borrower can use for things like paying off debt, paying for college, making home repairs and more. Most lenders will let a borrower take out up to 80% of the equity.
Borrowers can also use a VA Cash-Out Refinance loan to switch from a non-VA loan to one backed by the VA.
VA Streamline Refinance rates are lower than rates for VA cash-out refinancing, and the cash-out option application process has more requirements and paperwork.
Cash-out differences are:
Recommended Reading: How To Apply For Wells Fargo Loan
Deputy Finance Minister Announces Pension Loan Interest Rates Will Decrease Annually
Dundua added the Government would continue to work with the National Bank and Liberty Bank – the latter involved in issuing domestic pension-backed loans – to find common ways over decisions on previously issued loans. Photo: Georgian Public Broadcaster
Georgian Deputy Finance Minister Mikheil Dundua on Wednesday announced interest rates on pension-backed loans would see annual reduction, in comments on Government initiatives for pensioners and socially vulnerable citizens.
Georgian Public Broadcaster cited Dundua as saying the Government would work to apply the newly reduced upper interest rate limits for pension-backed loans to loans issued prior to the change.
The announcement follows news this week on the reduction of the upper limit for the rates to around 26 percent, following a campaign by the Citizens political party and a relevant decree by the Prime Minister.
The Minister also revealed plans to continue lowering the rates by refining and improving policies in the social sector, and noted the International Monetary Funds recognition of the Georgian social protection net in the region as exemplary in its report.
Dundua added the Government would continue to work with the National Bank and Liberty Bank – the latter involved in issuing domestic pension-backed loans – to find common ways over decisions on previously issued loans.
Pros And Cons Of A Va Streamline Refinance Loan
VA Streamline Refinance pros and cons vary depending on the borrowers current mortgage, as well as what the lender is offering. Be sure to shop around for a lender that will offer you a loan that will work with your financial situation and fit the goals you seek. You should research mortgage interest rates as well not only to find out what the standard is, but also how they compare to what youre paying now.
Read Also: Where Do I Find My Student Loan Number
Interest Rate Reduction Refinance Loan
If you have an existing VA-backed home loan and you want to reduce your monthly mortgage paymentsor make your payments more stablean interest rate reduction refinance loan may be right for you. Refinancing lets you replace your current loan with a new one under different terms. Find out if youre eligibleand how to apply.