Refinancing Your Home
There are many reasons why you may want to refinance your home, including: lowering your current payments by extending the loan period, refinancing because of a fluctuating adjustable rate mortgage (ARM), or shortening your loan term length to pay it off faster and save on interest.
While the aforementioned reasons are good, refinancing a home loan can prove to be a daunting task. However, the Interest Rate Reduction Loan (IRRRL) program helps to make the process more manageable for veterans and their families.
What Is the IRRRL Program?
An IRRRL is also known as a “VA to VA” or “Streamline” loan; it is considered the fastest and cheapest way for military veterans to refinance their homes and lower their rates on existing VA loans. The only exception to a lower rate qualification is a homeowner refinancing from a lower ARM to a potentially higher fixed rate.
The IRRRL program is designed for all veterans who currently have a VA loan, with the requirement that they have made on-time payments for the last 12 months.
You do not need to provide bank statements, W-2’s, a home appraisal or Certificate of Eligibility (COE). Lenders pull a Prior Loan Validation from the VA’s website to verify the existing VA loan.
In addition to the easy application, there are a few other benefits to refinancing with an IRRRL. First, you can lower your payments by refinancing to a lower rate or by extending the loan term by up to ten years. You can also choose to pay your home off faster by decreasing the term of the loan from 30 years to 15 years.
You can also make up to $6,000 in energy-efficient improvements to your home and include the costs in the new loan. Closing costs, funding fees, and up to two discount points can also be included in the refinanced loan.
Most VA borrowers will incur a 0.5% funding fee when refinancing their home. Similar to other VA loans, there are waivers for veterans with a service-connected disability or the surviving spouse of a veteran. If there is a funding fee, it may be included in the loan package.
Generally, the program only approves loans that will benefit veterans with lower payments. However, there are three exceptions: when refinancing an ARM, financing energy-efficient improvements into the IRRRL, or refinancing to a shorter term. This refinance option does not allow “cash back” on home equity, and second mortgages cannot be rolled into an IRRRL. Although the original loan can be refinanced, the second mortgage lender will have to agree to hold the subordinate mortgage.
If you’re ready to refinance your existing VA loan, compare available offers. Applying for an IRRRL is easy and could help you save on monthly payments over the life of your loan.