A VA Interest Rate Reduction Refinance Loan, the IRRRL, refinances a loan VA already backs, one carrying VA's guaranty or insurance or made by VA directly, to reduce the interest rate, with the same home securing the new loan. The loan you have must already be a VA loan. VA's regulation sets no appraisal requirement and no general credit underwriting requirement for it, except when the loan being refinanced is delinquent; federal law adds a net tangible benefit test, a seasoning rule and a cap on how long the costs may take to recoup; and the lender must present you with a comparison of the old loan and the new, twice. The loan is made by a private lender, which sets the rate, any discount points and the other closing costs, and can add conditions of its own. We arrange VA IRRRLs. This page sets out who is eligible, how the benefit and recoupment tests are shaped, what the funding fee is and who is exempt from it, and how to work out whether the IRRRL pays.
What a lender weighs before this program is on the table. A lender can add rules of its own, and those rules can differ from one lender to the next.
The IRRRL exists only for a loan VA already backs, and the new loan must be secured by the same home. You must own the home and either occupy it now or certify that you occupied it before; where active duty keeps a veteran away, the spouse's current or prior occupancy serves, certified in the form VA requires. A surviving spouse who was a co-obligor on the existing VA loan is treated as an eligible veteran for this purpose only. The Certificate of Eligibility used for the original loan shows the prior use of your entitlement, and the lender can retrieve it electronically if you no longer have it. A second mortgage on the home must agree to stay behind the new first lien.
Federal law will not let VA stand behind a refinance until the loan being refinanced is seasoned: a minimum number of consecutive monthly payments made on it and a minimum time passed since its first payment due date, whichever comes later, both set by statute. VA says a seasoning failure cannot be cured after the fact. If the loan being refinanced is delinquent, VA's regulation allows the new loan only with VA's advance approval, after the lender has given VA the reasons for the delinquency, shown that its cause has been corrected, and shown that you qualify under VA's credit standards.
The new loan has to deliver one of the benefits VA's regulation lists, a lower principal and interest payment among them, and pass the net tangible benefit test federal law sets, under which the rate must fall by at least an amount the law sets, more when the new loan is adjustable-rate, and not through discount points alone. The lender then certifies how long your lower payment takes to recoup the fees, closing costs and expenses of the refinance, which may not exceed the statutory maximum; the funding fee, taxes and escrow are left out of that test, though the comparison statement's own recoupment figure counts them. Passing VA's tests is not the same as the refinance paying for you: if you expect to sell or refinance again before the costs come back, the saving never catches up with them, and a new term longer than the one you have left can cost more in interest over its life. Our refinance calculator works that break-even out from your own numbers.
It is not a cash-out loan. The new loan amount is capped at the balance of the loan being refinanced plus the closing costs VA authorizes and a limited discount, with energy efficient improvements where they apply; a refinance whose principal exceeds the payoff is a cash-out refinance under federal law, and VA regulates that separately. It cannot refinance a loan that is not a VA loan, cannot move the security to a different home, and cannot extend the term beyond a limit the statute sets relative to the original term.
VA's rules are the floor. The lender sets the interest rate, any discount points and the other closing costs, and decides whether to pull credit, verify income or order a valuation on an IRRRL the regulation does not require one for. VA's own page says terms and fees vary from lender to lender and suggests checking with several, which is what taking the loan to more than one lender is for. VA does not re-underwrite the loan: the lender certifies the recoupment period and the benefit test to VA when it requests the guaranty.
The steps in order, so you can see what is coming. Nothing here is underwritten until a lender underwrites it.
The balance, the rate, when the first payment was due, whether you live in the home or have before, and whether the loan is current. That is enough for your loan officer to say whether the seasoning rule is met and whether the benefit test is in reach.
Bring the Certificate of Eligibility you used for the original loan, or the lender retrieves it electronically through VA's portal; it shows the prior use of your entitlement. You certify your current or prior occupancy, or a spouse's where active duty keeps you away. Whatever the lender's own program requires beyond VA's rules, the lender sets.
Shortly after application the lender presents the comparison statement, the old loan against the new, with the time it takes to recoup the closing costs, and you confirm that you received it. The lender presents it again at closing. When it requests VA's guaranty, the lender certifies the recoupment period and the benefit test to VA; VA does not re-underwrite the loan.
Set the funding fee unless you are exempt, the lender's closing costs and any discount points against the monthly reduction and the time you expect to keep the loan, and weigh a term longer than the one you have left. Our refinance calculator works the break-even out from your own numbers.
Tell us what you are planning and where the property is. A loan officer here reads it with this program in mind and can go over whether it fits your file, and what else might.
Call or write to us and a loan officer here reads what you send. If you are ready, the application is open.
If yours is not here, call us. The useful answer depends on your file.
A VA Interest Rate Reduction Refinance Loan, or IRRRL, refinances an existing VA-backed loan, one guaranteed by VA, insured by VA or made by VA directly, to reduce the interest rate, secured by the same home. It is made by a private lender, not by VA, and federal law requires a net tangible benefit, a seasoned loan, a recoupment period within a statutory maximum, and a comparison of the old loan and the new presented to the borrower twice.
No. The IRRRL is only for an existing loan guaranteed by VA, insured by VA or made by VA directly, and the new loan must be secured by the same home. A loan that is not a VA loan cannot be refinanced with an IRRRL; VA's cash-out refinance is a separate product with rules of its own.
VA's regulation for the IRRRL contains no appraisal requirement and no general credit underwriting requirement; VA's credit standards apply only when the loan being refinanced is delinquent or the loan is a VA-approved foreclosure prevention case, and VA must then approve it in advance. VA's guidance does call for a property valuation when an IRRRL moves into an adjustable-rate loan, so the lender can show the loan-to-value limits on financed points. Whether a lender pulls credit, verifies income or orders a valuation on any other IRRRL is the lender's own practice.
Usually, unless you are exempt. VA charges a one-time funding fee on an IRRRL, in a rate category of its own that VA publishes, and it can be financed into the loan or paid at closing. You are exempt if you receive VA compensation for a service-connected disability, or would but for retirement or active-service pay, if you are the surviving spouse of a veteran who died from a service-connected disability, or if you are on active duty and provide evidence of a Purple Heart on or before closing. A refund may be available if compensation is later awarded with an effective date before the closing.
No. Federal law lets VA provide its guaranty on an IRRRL without regard to the amount of entitlement the veteran has available, and the veteran's entitlement is not charged for it. A surviving spouse who was a co-obligor on the existing VA loan is treated as an eligible veteran for the IRRRL only.
An earned benefit
For veterans, service members and some surviving spouses. It begins with a Certificate of Eligibility.
Refinance
Replaces a loan FHA already insures with a new FHA loan on limited documentation and no FHA appraisal, when the new loan gives you a net tangible benefit.
Refinance
Replaces your mortgage with a larger one and pays you the difference at closing. The new loan's rate, term and costs replace the ones you had, and the home secures it.
Where this program fits:Buying a homeRefinancingThe county's loan limitsThe Central CoastServices
The county seats:San Luis ObispoSanta Barbara
Run the numbers:Refinance break-even calculator
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This page is general information about a loan program, not an offer of credit or a commitment to lend. What a lender will do with your file depends on the file.
Answer a few questions and your loan officer can talk you through which programs could fit your file, including when this one does not.
No credit pull to get started. This is not a commitment to lend. Equal Housing Opportunity.
