Wouldn't it be nice to be able to refinance without worrying about your home's value or your credit score? If you're an eligible homeowner with a VA mortgage, the U.S. Department of Veterans Affairs (VA) offers that opportunity. Its Interest Rate Reduction Refinance (IRRR) loan lets eligible borrowers replace their VA home loans with new VA mortgages. Benefits for homeowners include:
- IRRR loans are made based on the VA Certificate of Eligibility (COE) issued for the homeowner's existing VA loan. There is no delay associated with obtaining a new COE.
- No appraisal or credit qualifying is required.
- An IRRR loan can be used to lower your current mortgage rate or refinance from a VA adjustable rate loan to a fixed rate mortgage.
- Homeowners can choose to refinance with no out-of-pocket costs (but the rate is slightly higher).
Eligibility Requirements For A VA IRRRL
According to the VA, the following requirements must be met:
- The IRRR loan can only be used to pay off an existing VA home loan for which a veteran borrower or eligible surviving spouse has used his or her VA home loan entitlement.
- Any junior lienholder (second mortgage, home equity loan or line of credit) must agree to subordinate to the IRRR loan so that the IRRR loan is the first mortgage of record.
- Homeowners must certify that they currently occupy or have previously occupied the residence being refinanced.
Things to Keep in Mind
- Borrowers are not allowed to take out additional cash from their refinance loans.
- The VA recommends that homeowners shop multiple lenders for an IRRR loan, as mortgage rates and fees can vary.
- There is a .5 percent funding fee for refinancing a VA loan. It can be wrapped into the loan.
- Veterans receiving compensation for service-related disabilities, veterans who would be eligible for such disability compensation if they were not receiving retirement or active duty pay and the surviving spouse of a veteran who died in service or due to a service-related injury are exempt from paying the VA funding fee.
- The VA does not make mortgages. Its network of approved mortgage lenders offer home loans, and the VA guarantees them. Mortgage lenders can impose their own underwriting requirements in addition to those of the VA. These are called overlays.
Request VA loan refinance quotes from LendingTree's network of VA approved lenders for comparing loan options and to learn more about IRRR and other VA loan programs.