What Is a VA Streamline Refinance (VA IRRRL)?

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The VA Interest Rate Reduction Refinance Loan (IRRRL) is a refinancing option for veterans with existing VA-backed home loans.

Refinancing a home mortgage can be a complex and lengthy process unless you’re a veteran with a U.S. Department of Veterans Affairs-backed loan. Qualified veterans have access to the VA Streamline Refinance, also known as the VA Interest Rate Reduction Refinance Loan (IRRRL), which allows homeowners to lock in a lower interest rate or change their mortgage terms. 

In addition to unlocking the typical refinancing benefits, this process also comes with fewer eligibility requirements and fewer steps than a typical refinance, such as no appraisal fee. Continue reading to learn more about the VA Streamline Refinance type, whether it’s a good move for you, and what you should know about the application process. 

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What is a VA Streamline Refinance?

“The VA Interest Rate Reduction Refinance Loan (IRRRL) is a streamlined refinance program for veteran borrowers who have outstanding VA loans, intended to reduce the interest rate and the associated payments with minimal documentation,” says real estate investor Daniel Cabrera, owner of Sell My House Fast SA Texas. The program is sometimes shortened to VA Streamline Refinance. 

According to the VA’s website, borrowers can also switch from an adjustable-rate mortgage to a fixed-rate option with fewer requirements than other refinancing programs. 

Pros

• “No appraisal is required in the vast majority of cases,” Cabrera says. 
• “Reduced closing fees compared with traditional refinancing,” Cabrera says. 
• Lower interest rates 
• No credit underwriting 

Cons

• No cash-out option 
• Limited eligibility 
• Extends your loan term 

How Does a VA Streamline Refinance Work

The VA Streamline Refinance offers veterans a simplified process to lower their interest rates and monthly mortgage payments on existing VA loans. First, you must have an existing VA-backed home loan and certify that you live in the home or have lived there. You’ll then apply through a VA-approved lender. The process usually doesn’t require credit, income or employment verification, which significantly streamlines the procedure.

In most cases, a new home appraisal isn't needed, further simplifying the process. Closing costs can often be rolled into the new loan to reduce upfront expenses. You can opt for a new loan term of either 30 or 15 years, which starts fresh from the refinancing date. This process typically closes faster than other refinance options due to the reduced documentation requirements and lack of an appraisal.

Let’s say you have a 30-year VA loan with a balance of $300,000 at an 8.5% interest rate. Your monthly principal and interest payment is approximately $2,307 and the total estimated interest paid over 30 years would be $830,427.

Now, if you refinance to a new 30-year VA loan with a 6% interest rate through the VA IRRRL program, your new estimated monthly payment would be around $1,798.65 and the total estimated interest paid over 30 years would drop to $347,514. This results in interest savings of $482,913 over the life of the loan.

Applying for a VA Streamline Refinance is similar to a typical refinance, with fewer requirements. 

Check if You Qualify

To check if you qualify for a VA IRRRL, you must confirm your existing VA-backed mortgage. Ensure the refinance will result in a financial benefit, such as a lower interest rate or monthly payment. Also, certify that you currently live in or have previously lived in the home associated with the loan.

Prepare Your Documents

Documents you’ll need for a VA IRRRL include:

• Your mortgage statement
• Government-issued identification
• Certificate of Eligibility (CoE) to prove your entitlement to VA loan benefits
• Proof of current income, such as recent pay stubs

Find a VA-Approved Lender

A VA-approved lender can be a mortgage company, bank or credit union. Request quotes from these lenders to compare rates and terms. After selecting a lender, complete their application process, which usually requires less paperwork than a standard refinance. Once your application is approved, finalize the loan by signing the necessary documents.

Lower Payments With a VA Streamline Refinance

• VA IRRRL allows veterans to refinance their existing VA loans to secure a lower interest rate or switch from an adjustable-rate mortgage to a fixed-rate mortgage.
• The streamlined process does not require a home appraisal or credit underwriting in most cases, making it faster and less intrusive than other refinancing options.
• Veterans can roll closing costs into the new loan, minimizing out-of-pocket expenses.

Why You Should Trust Us

Benzinga has offered investment and mortgage advice to more than one million people. Our experts include financial professionals and homeowners, such as Anthony O’Reilly, the writer of this piece. Anthony is a former journalist who’s won awards for his coverage of the New York City economy. He’s navigated tricky real estate markets in New York, Northern Virginia and North Carolina.

For this story, we worked with real estate investor Daniel Cabrera, owner of Sell My House Fast SA Texas. 

Frequently Asked Questions 

Sources

• Daniel Cabrera, owner of Sell My House Fast SA Texas. 
• U.S. Department of Veterans Affairs, “Interest rate reduction refinance loan.” https://www.va.gov/housing-assistance/home-loans/loan-types/interest-rate-reduction-loan/