The Streamline refinance, or Interest Rate Reduction Refinance Loan (IRRRL), is one of the best options for homeowners who already have a VA Loan and would like to refinance into a lower interest rate and lower their monthly mortgage payment.
VA Streamline refinance loans are relatively easy and can be completed quickly, due to the fact that homeowners are refinancing from one VA Loan product to another.
With an IRRRL, there are several prominent advantages, including no required appraisal in some cases, no need to obtain another Certificate of Eligibility and little to no out-of-pocket costs.
To avoid out-of-pocket costs, homeowners can choose to roll the closing costs and fees into the balance of the loan.
Today's interest rates are at competitive levels, and with a reduction of just a half of a percent, a borrower could potentially generate tens of thousands in savings over the life of a loan.
Let’s look at a quick example using the same loan terms (30-years, fixed rate) with three different interest rates.
|Example||Monthly Estimated Principle & Interest Payment||Total Estimated Interest Paid Over 30 Years|
|$250,000 loan at 5.5 percent interest rate||$1,419||$261,010|
|$250,000 loan at 5 percent interest rate||$1,342||$233,139|
|$250,000 loan at 4.5 percent interest rate||$1,266||$206,017|
Savings and interest rates shown here are for illustrative purposes only and may vary based on a variety of factors. All loans require approval and proof of eligibility and are subject to the complete terms and conditions outlined in the loan agreement documents.
To be eligible for a VA Streamline refinance, the property must currently be financed with a VA Loan. The IRRRL is not available to veterans with non-VA loans.
Lenders may also have guidelines and requirements regarding how long you’ve had your current mortgage, how many payments you’ve made and how long it will take to recoup the costs and fees associated with the new loan.
Specific guidelines and policies on credit scores, appraisals, loan-to-value ratio and more can vary by lender.
Veterans United currently requires homeowners to have no 30-day late payments in the past 12 months on the loan being refinanced.
The IRRRL only requires previous occupancy of the home. You do not need to intend to occupy the property as your primary residence.
Additionally, the borrower is not allowed to extract cash from their equity using an IRRRL. The VA has a separate loan product for this purpose – the VA Cash-Out refinance.
The VA Funding Fee is an upfront fee applied to every purchase and refinance loan. Proceeds from this fee are paid directly to the Department of Veterans Affairs and are used to cover losses on any loans that may go into default.
The good news is the VA Funding Fee is lower on IRRRLs than for typical VA purchase loans and for the Cash-Out refinance. Borrowers who are not exempt pay a 0.5 percent funding fee on a Streamline. This is a cost homeowners can finance into the new loan.
Homeowners who receive compensation for a service-connected disability and qualified surviving spouses are exempt from the funding fee.