VA Streamline Refinance (VA IRRRL): What Is It and How Does It Work?

A VA IRRRL replaces your VA home loan with better rates and, ideally, better payments.

Refinancing a home loan can often help homeowners secure better terms, including a lower mortgage rate and a more affordable monthly payment. One unique refinancing option for eligible Department of Veterans Affairs (VA) customers is the VA Interest Rate Reduction Refinance Loan (IRRRL), also called a VA streamline refinance.

Let's explore what a VA IRRRL is and how it works.

What Is a VA IRRRL?

A VA IRRRL lets eligible homeowners replace their existing VA home loan with a new one that features more desirable terms (either a lower mortgage rate, a lower monthly payment, or changing an adjustable-rate mortgage (ARM) to a fixed-rate mortgage). VA IRRRL loans are referred to as streamline refinances because you can refinance in a faster, simpler way than you can with other loan types.

However, unlike with VA cash out refinances and conventional cash out refinances, you can't get cash from your home's equity with an IRRRL refinance.

How Does a VA Streamline Refinance Work?

The VA IRRRL refinance process is typically faster and involves less documentation than other types of refinance loans. This is because VA IRRRLs simplify some of the steps of standard mortgage refinancing, such as home appraisals and extensive underwriting.

Additionally, mortgage approval is often possible even if your home is worth less than what you currently owe, or your financial situation has seen a downturn. However, there are specific requirements to qualify.

VA IRRRL Requirements

To qualify for a VA streamline refinance, the VA requires that the following conditions be met:

• Your existing mortgage is a VA loan.
• The IRRRL is used to refinance your existing VA-backed home loan.
• You have certified proof that you currently use (or previously used) the home as your primary residence.

Other requirements include:

• Mortgage payments must be up to date.
• Current VA loan must be "seasoned," meaning you've made at least six consecutive on-time monthly payments, and at least 210 days have passed since the date of your first mortgage payment.
• Meet the lender's specific requirements for credit scores (if any).
• There's a net-tangible benefit, which means the IRRRL will result in a clear financial benefit, such as a lower mortgage payment or interest rate.

Depending on your lender, or if you have a second mortgage on the property you're refinancing, there may be additional requirements.

VA Streamline Example

To better understand how a VA IRRRL works, here's an example of how it might look in a real-world scenario:

You're a Navy veteran looking to refinance your mortgage. Your current VA loan has a balance of $250,000 at 6.5% interest, meaning your monthly principal and interest payment is about $1,580. Mortgage rates drop to about 5% and you contact Freedom Mortgage to find out if you can take advantage of the rate drop. By refinancing through a VA IRRRL to a 5% interest rate, your monthly mortgage payment drops to about $1,342—saving you about $238 each month. You also rolled the $1,250 reduced VA funding fee and about $3,000 in other closing costs into the new loan, so you didn't have to pay anything out-of-pocket.

Curious how a VA IRRRL might benefit you specifically? Check out our VA loan refinance calculator.

Advantages of a VA IRRRL

If you're a veteran, active-duty service member, eligible surviving spouse, or qualifying member in the National Guard or U.S. Armed Forces Reserves , using a VA IRRRL as a refinance option could help you benefit from one or more of its many advantages:

• Enjoy lower interest rates and a lower monthly payment
• The ability to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage
• A lower VA funding fee (only 0.5%, compared to the standard 2.15%-3.3% on a normal VA refinance)
• No appraisal requirement (in most cases)

It's important to note that even if a VA streamline refinance helps you reduce your monthly payment, you could end up paying more over time if you're extending the loan term. Make sure you clearly understand your total cost before you move forward with a VA IRRRL.

Some lenders might allow you to keep your current loan term with a VA streamline refinance. So, for example, if you only have 13 years left on your current VA mortgage, you may be able to refinance to a new VA mortgage that begins with a 13-year term.

How Much Does a VA IRRRL Cost?

While VA IRRRLs can offer you money-saving benefits, the loans come with refinance costs that you should be aware of.

VA Funding Fee

You'll have to pay the VA funding fee just like you did when you first purchased your home with a VA home loan. The good news is that for IRRRLs, the funding fee is only 0.5% of the loan amount, unlike the funding fees for VA cash out refinance loans, which can range from 2.15% (for first use) to 3.3% (for subsequent uses).

VA funding fees can be rolled into your loan (most common), paid in full at closing, covered by seller concessions, or offset with lender credits.

Veterans and service members recognized by the VA as disabled and receiving disability compensation are exempt from paying the funding fee. Some surviving spouses may be exempt also. Freedom Mortgage will help you determine your eligibility for a VA funding fee waiver.

Closing Costs

Closing costs and fees for VA IRRRLs include loan origination fees, title insurance, property taxes, and homeowners insurance. Closing costs may be less expensive for a VA streamline refinance than with other types of home loans, but this is not guaranteed.

How Many Times Can You Do a VA Streamline Refinance?

There's no limit to how many times you can refinance with a VA IRRRL, since your existing VA loan is replaced by the new one each time . As long as you complete the necessary waiting period between each mortgage refinance, and you benefit from refinancing, you could use a VA streamline refinance numerous times.

How To Apply for a VA IRRRL

Applying for a VA streamline refinance is faster and simpler than the conventional refinance process. Here's a step-by-step guide to help you understand how the process works:

1. Check Your Eligibility

Verify your current mortgage is a VA loan and that you meet the VA's seasoning requirement (at least six consecutive on-time payments and, usually, at least 210 days since the due date for the first mortgage payment on your VA loan being refinanced).

The refinance will also need to result in a financial benefit for you, such as a lower monthly payment or switching from an adjustable-rate to a fixed-rate loan.

2. Browse and Compare Lenders

Many mortgage lenders offer VA IRRRLs, so you don't have to use the same lender that originated your current VA loan.

To find the best loan terms, you'll want to get quotes from multiple lenders to compare interest rates, closing costs, and any other fees. Freedom Mortgage is confident and ready to give you a helpful, smooth and transparent refinance experience.

3. Submit Your Application

After you've chosen your lender, you'll need to complete the loan application. This will involve providing any required documents, but not nearly as many as you provided when applying for your existing VA loan.

You may need to verify your Certificate of Eligibility (COE), which Freedom Mortgage can help you do, but you typically don't need to include income documentation or get an appraisal.

4. Close and Enjoy Your New Loan Terms

After being approved, you'll review and sign your closing documents. If you're rolling your closing costs into the new loan, you likely won't need to bring any cash to the closing table.

After closing, you'll begin making payments on your new VA IRRRL loan—ideally with a lower interest rate and monthly payment, or a shorter loan term.

Final Thoughts: Is a VA IRRRL Right for You?

A VA IRRRL could be worth it if you'd like to lower your monthly mortgage payment so you can focus on saving money, or your other financial goals. Plus, the VA streamline refinance process is less complicated and time-consuming than most other types of home loans.

If you're interested in saving money with a VA IRRRL, get started today.