VA Streamline Refinance (VA IRRRL): What You Should Know
If you have an existing VA loan, you may qualify to streamline your refinance process through a VA interest rate reduction refinance loan (IRRRL). This program allows you to replace your current VA mortgage with a new one at a lower rate or shorter term. You also have the option to roll your closing costs into the new loan.
Here’s what you need to know before getting started on the path to better mortgage terms with a VA IRRRL.
What is a VA IRRRL?
The VA IRRRL is a home loan refinance program guaranteed by the U.S. Department of Veterans Affairs (VA) — it allows those with an existing VA loan to refinance their mortgage through a simplified approval process. Also known as the “VA streamline refinance,” the program permits you to skip the income documentation and VA home appraisal requirements you’d typically need to satisfy with a regular VA refinance.
Like any refinance program, the VA IRRRL can be used to replace a current VA loan with a new one at a lower interest rate and monthly payment. You can also choose a different repayment term or switch from an adjustable-rate mortgage (ARM) to a fixed-rate option.
See current fixed VA loan rates today.
However, the VA streamline refinance program also has some unique benefits. For instance, eligible borrowers can roll VA closing costs into an IRRRL and, in some cases, even add up to $6,000 toward energy-efficient improvement expenses to the balance.
How does a VA IRRRL work?
The VA streamline refinance program doesn’t include any official appraisal, credit or underwriting requirements. Still, individual lenders may have their own specific eligibility criteria, which you’d need to meet before qualifying for this refinance type.
We’ll explain in further detail later, but typical VA IRRRL requirements include:
- Conducting a new title search
- Purchasing a new title insurance policy
- Paying other closing costs
Luckily, though, the closing costs can often be rolled into your loan amount instead of you having to spend the money upfront.
→ You’ll also need to prove that refinancing comes with a “net tangible benefit,” such as a better interest rate. For instance, as a rule of thumb, it makes sense to refinance if you can save at least 1% on your rate. However, if your lender determines that refinancing doesn’t provide you with a clear financial benefit during the underwriting process, it’s likely your application will be denied.
Learn more about the usual VA home loan requirements, qualifications, and limits.
Pros and cons of a VA IRRRL
| Pros | Cons |
|---|---|
| Potential to save money: Unless you’re switching from an ARM to a fixed-rate mortgage, VA IRRRL rates are required to be lower than your existing mortgage rate. Securing a loan with a lower interest rate will likely help you save money on your monthly payment. | Loan program restrictions: You must have an existing VA loan to qualify for a VA IRRRL. If you have another type of home loan, you won't qualify to participate in this loan program, even if you're a military borrower. |
| Lower funding fee: While the VA funding fee on a VA purchase loan can extend as high as 3.3%, the funding fee on an IRRRL is only 0.5%. | No cash-out option: The VA streamline refinance loan doesn’t allow you to leverage your home equity to borrow more than you owe on your home. If that’s your goal, the VA cash-out refinance program can be a better fit. |
| Fewer closing costs: Many closing costs, including the VA funding fee, can be added to your loan balance and paid over time. You also have the option to finance up to $6,000 for energy-efficient improvements, as long as they're completed within 90 days of your loan closing. | Not available to borrowers in default: As part of the loan approval process, your lender must check if you’ve previously defaulted on any federally backed loans, including student loans. If that’s the case, you likely won’t qualify. |
How to apply for a VA streamline refinance loan
If you’ve decided that refinancing is the right move for you, the next step is to apply for your new loan via the VA IRRRL program. You’ll need to talk to a lender to get the process started, but here’s an overview of what to expect:
- Dig up your closing papers. Lenders will need to verify the date you closed on your current VA loan, so having your closing paperwork handy will save time.
- Provide a current mortgage statement. You’ll need this so the lender can order a payoff to replace your current mortgage with a new one.
- Check your certificate of eligibility. Most military borrowers can obtain their certificate of eligibility (COE) online to prove they still have enough entitlement for the refinance. VA borrowers with a service-related disability can also verify whether they qualify for the VA funding fee exemption.
- Shop for a lender. Not all lenders are VA-approved, so you may need to contact multiple mortgage companies to get competitive VA IRRRL rates. Try a VA comparison rate tool to speed up the process and have lenders call you.
- Decide how to handle your closing costs. Let the lender know if you want to add your closing costs to the loan balance or pay them out of pocket.
- Review your closing disclosure and sign your documents. You should receive a closing disclosure at least three business days before your closing date. Make sure the figures are correct and provide any final items requested by your lender.
Learn more about our picks for the best VA mortgage lenders.
VA IRRRL eligibility requirements
You won’t need to meet any income or home value requirements, but there are other very specific hoops you’ll need to jump through to qualify for a VA IRRRL. Here’s what you need:
Seasoning
At least 210 days must have passed since you took out your current VA mortgage.
CAIVRS check
Lenders must check the Credit Alert Interactive Verification Reporting System (CAIVRS) database to confirm you don’t have any defaulted federal debt, including:
- Federal student loans
- Small Business Administration (SBA) loans
- Federal Housing Administration (FHA) loans
- U.S. Department of Agriculture (USDA) loans
Break-even point
The lender must confirm that you’ll reach your break-even point — or recoup your closing costs — within 36 months.
For example, if you’re saving $100 per month, your closing costs can’t exceed $3,600 to qualify ($3,600 divided by $100 per month savings equals a 36-month break even). If it takes you longer to break even, your IRRRL application could be denied.
Learn more about what a refinance break-even point is and how to find yours.
Net tangible benefit
Your new principal and interest payment must be lower than your current payment, unless you’re refinancing from an ARM to a fixed-rate loan, financing energy-efficient upgrades or shortening your repayment term.
Try using our refinance calculator to calculate your new estimated monthly payment.
Funding fee
VA borrowers only have to pay a VA funding fee equal to 0.5% of the loan balance for a VA streamline refinance. The funding fee is charged to offset the cost of the program to taxpayers and typically costs between 2.3% and 3.6% for a regular refinance.
Occupancy
You’ll need to certify that you’ve used the property you’re refinancing as your primary residence. You can either currently occupy the property or pledge that you lived there in the past.
Is a VA streamline refinance right for you?
Now that you know more about how a VA IRRRL works and how to qualify, it may be helpful to take a look at a few scenarios where this loan program makes sense and a few signs that it may not be the best fit.
When the VA IRRRL may make sense
→ You want to save money on your mortgage payments: This program can help you reduce your mortgage interest rate or spread out your payments over a longer loan term.
→ You’re looking to refinance an ARM: Adjustable-rate mortgages start with a lower introductory rate period, but adjust to market rates over time — this can raise your monthly payment. If you want to refinance into a fixed-rate mortgage to achieve more stable payments or replace your existing ARM with a new one, the VA IRRRL can help.
→ You want to pay off your loan faster: You can do this by selecting a shorter loan term.
When you should skip the VA IRRRL
→ You’re planning to move in the near future: If you’re planning on moving sooner rather than later, it’s unlikely that you’ll be able to achieve enough savings to break even on your refinance costs.
→ You’ve had your mortgage for a long time: Refinancing may not be the best idea if you’re fairly close to paying off your existing loan. The way mortgage amortization works means that at the beginning of your loan term, the majority of your payment goes toward interest charges. Eventually, more of your payment is applied to your principal balance, allowing you to build home equity faster. Refinancing after many years would reset that scenario.
→ You have a prepayment penalty: Prepayment penalties are rare, but if your loan has one, your refi savings may not outweigh the costs of paying off your loan early.
Looking for a way to access more money from your home? See how a home equity loan can help you access up to 85% of the equity in your house.Frequently asked questions
There’s no limit to the number of times you can refinance through the VA IRRRL program, as long as you wait the required 210 days and can prove that refinancing provides a net tangible benefit each time.
The maximum term of a VA IRRRL loan can vary. It’s typically 10 years longer than the term of the loan being refinanced. For example, if the old loan has a 15-year term, the new loan term can’t exceed 25 years. However, at no point can the term exceed a maximum of 30 years and 32 days.
Yes, but only two mortgage points can be rolled into the loan amount. Any additional points must be paid from your own funds.
Closing costs on a VA IRRRL typically cost between 2% and 6% of the new loan amount.
For the most part, you can’t take cash out with the IRRRL program. The one exception is if you plan to borrow up to the $6,000 limit to pay for energy-efficient improvements that can be completed within 90 days of closing. If you want to take cash out, consider the VA cash-out refinance program instead.
VA loans must be “seasoned,” which means they must be held by the borrower for a set amount of time before a refinance can take place. The VA requires you to wait until 210 days after your first payment due date on your existing loan.