The VA Interest Rate Reduction Refinance Loan (IRRRL), commonly known as the VA Streamline Refinance, is the simplest and fastest way for veterans to reduce their monthly mortgage payments or convert an adjustable-rate loan into a stable fixed-rate mortgage.
I. What is the VA IRRRL? (The Streamline Advantage)
Definition
The IRRRL is a VA-to-VA refinance option. It is specifically designed for veterans who already have a VA-backed home loan and want to refinance into a loan with more favorable terms (typically a lower interest rate).
The “Streamline” Benefit
The IRRRL is “streamlined” because the VA requires significantly less documentation than a traditional refinance. This saves time and minimizes VA loan closing costs.
The primary requirements that are typically waived include:
- No Appraisal Required: The loan uses the property’s original VA value, regardless of current market fluctuations.
- No Income/Employment Verification: Full verification of debt-to-income ratios is usually not required.
- No Credit Underwriting: While the VA doesn’t mandate a credit check, lenders may perform a “soft pull” to verify your mortgage payment history.
II. VA IRRRL Eligibility and Requirements
While the process is simplified, specific mandatory criteria must be met to qualify:
- Existing VA Loan: You must currently have a VA-backed loan. If you are looking to switch from a different loan type, you must use the VA Cash-Out Refinance.
- Occupancy Certification (Prior Occupancy): You must certify that you previously occupied the home. This makes the IRRRL a powerful tool for veterans who have moved and converted their original home into a rental property.
- Loan Seasoning: Your existing loan must be “seasoned,” meaning you have made at least six consecutive payments and at least 210 days have passed since your first payment due date.
III. The “Net Tangible Benefit” (NTB) Requirement
The VA strictly requires that the IRRRL must result in a net tangible benefit—a clear financial advantage for the borrower.
The Recoupment Test
Lenders must demonstrate that the veteran will “recoup” the costs and fees of the new loan within 36 months. This ensures that the monthly savings actually outweigh the cost of doing the refinance within three years.
IV. Costs and Financing the VA IRRRL
VA Funding Fee
The IRRRL has the lowest funding fee of all VA products. The fee is a fixed rate of 0.50% of the loan amount.
- Exemptions: Veterans receiving disability compensation are exempt (0.00%). (See full VA Funding Fee details here).
Financing Options
Both the funding fee and allowable closing costs can be rolled into the new loan amount. This is why the IRRRL is often called a “zero out-of-pocket” refinance.
V. IRRRL vs. VA Cash-Out Refinance
The IRRRL is strictly for rate and term changes. It is distinct from the VA Cash-Out Refinance, as shown below:
| Feature | VA IRRRL (Streamline) | VA Cash-Out Refinance |
|---|---|---|
| Prior Loan Type | Must be a VA Loan. | Can be VA, FHA, or Conventional. |
| Purpose | Lower rate/payment. | Take equity cash-out. |
| Appraisal | Not Required. | Required. |
| Funding Fee | 0.50%. | 2.15% to 3.30%. |
VI. Frequently Asked Questions (FAQ)
Q: Can I use the VA IRRRL to skip a mortgage payment?
A: While the timing of a refinance often results in a “payment holiday,” this is not the purpose of the loan. The accrued interest is simply added to your new balance.
Q: I turned my VA home into a rental property. Can I still use the IRRRL?
A: Yes. Unlike a VA Purchase Loan, the IRRRL only requires prior occupancy, not current occupancy.
Q: Does the IRRRL use up more of my VA entitlement?
A: No. The IRRRL reuses the original entitlement tied to your first loan. It does not impact your ability to use Bonus Entitlement for a second home purchase.