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VA Streamline Refinance (IRRRL) Pros and Cons

VA Streamline Refinance (IRRRL) Pros and Cons

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience
The VA streamline refinance program, also known as an interest rate reduction refinancing loan (IRRRL) or VA to VA refinance, enables borrowers to refinance an existing VA mortgage with fewer borrower qualification requirements as compared to a standard refinance.  By making the refinance process more efficient and less burdensome, the VA streamline program saves borrowers significant time and money.Key benefits of the VA streamline refinance program include no credit score or appraisal requirement as well as no monthly mortgage insurance fees and a lower mortgage rate.  In fact, the VA streamline refinance program is also called an interest rate reduction refinance loan (IRRRL) because the interest rate on your new loan must be less than the interest rate on your existing loan under most circumstances.  VA streamline refinance program considerations include loan restrictions and the added expense of the upfront VA funding fee.
We review the full list of the pros and cons for a VA streamline refinance below.  Borrowers should evaluate both the positives and negatives of the VA streamline refinance to determine if it is the right mortgage refinance option for them.

VA Streamline Refinance (IRRRL) Pros

Mortgage pro

Reduced Borrower Qualification Requirements -- No Credit Report or New Certificate of Eligibility Required

The VA streamline program does not require borrowers to verify their credit score or provide a new certificate of eligibility to qualify for the program.  This significantly streamlines the refinance application process as borrowers are required to provide less information to qualify for a VA streamline refinance.  For example, instead obtaining a new certificate of eligibility borrowers can use their existing certificate that shows prior usage of your entitlement.  The VA streamline refinance program is called "streamline" because of the significant documentation, cost and hassle it eliminates from the mortgage refinance process.  Please note that although the VA streamline refinance program does not require credit score verification, some lenders may request this documentation to demonstrate that borrowers can afford their mortgage and monthly payment.

Mortgage pro

No Appraisal Report Requirement

VA streamline refinance applicants are not required to obtain a property appraisal report.  Eliminating the appraisal report along with other fees saves borrowers hundreds of dollars in closing costs and streamlines the mortgage closing timetable.  For a standard refinance, obtaining an appraisal report adds several weeks and extra costs to the mortgage process.   A VA streamline refinance usually takes less than a month to close as compared to more than a month or potentially longer for a typical home loan refinance.  Please note that although an appraisal report is not required according to VA streamline refinance guidelines, some lenders require an appraisal to meet their internal underwriting rules.

Mortgage pro

Low Mortgage Rate

VA mortgage rates are typically 0.250% - 0.500% lower than the interest rate on a regular mortgage and are among the lowest of all mortgages. The interest rate for a VA loan is lower for several reasons. First, the federal government guarantees 25% of the loan amount, which protects lenders against losses in the event that borrowers default on their mortgage. Second, military personnel tend to be more financially responsible and credit-worthy which also enables lenders to offer lower rates on VA mortgages. The lower interest rate on a VA mortgage reduces your monthly payment and possibly saves you thousands of dollars in interest expense over the life of your mortgage. The lower rate is particularly beneficial to borrowers with lower credit scores, who usually pay a higher interest rate on their mortgage. Because the VA streamline refinance program does not require a credit report, borrowers who may have a low credit score still benefit from the lower VA mortgage rate.


Use the table below to shop lenders and find the VA loan with the lowest interest rate and fees. The table compares VA loan rates and fees for leading lenders in your area. Because you may be required to pay a one-time VA funding fee, the closing costs are higher but VA mortgage rates are typically lower. Borrowers should compare multiple lenders to find the VA streamline refinance loan with the best terms.

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Current VA Mortgage Rates as of October 24, 2019
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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.
Mortgage pro

No Borrower Income Limit

The VA streamline refinance program does not limit how much money borrowers can earn.  Several other mortgage refinance assistance programs use a maximum income limit to determine borrower eligibility.  By not using a borrower income limit, the VA streamline program enables more borrowers to refinance their mortgage.

Mortgage pro

Flexible Payment History Requirement

The mortgage payment history required by the VA streamline refinance program is more flexible than other streamline refinance programs such as the FHA and USDA streamline programs.  Although program guidelines require that borrowers are current on their mortgage with no more than one late payment within a year of applying for the loan, borrowers may be able to use the VA streamline program to refinance even if they are delinquent on their loan.  Delinquent borrowers must provide a letter explaining the delinquency and resolve the delinquency when they refinance.  Additionally, the VA must approve all mortgages for delinquent borrowers.  If borrowers can meet this criteria, the VA streamline program may be a better refinance option for home owners who are experiencing financial hardship and struggling to make their monthly payment.

Mortgage pro

No Ongoing Monthly Mortgage Insurance Fee

Unlike other government-backed mortgage programs, the VA mortgage program does not require borrowers to pay an ongoing monthly mortgage insurance fee.  For example, the government-backed FHA mortgage program requires that borrowers pay an ongoing monthly FHA mortgage insurance premium (MIP) and most conventional mortgages require borrowers to pay private mortgage insurance (PMI) if your loan-to-value (LTV) ratio is greater than 80%.  FHA MIP and private mortgage insurance (PMI) are extra costs borrowers are required to pay in addition to their monthly mortgage payments.  By not requiring monthly mortgage insurance, the VA streamline refinance program offers borrowers lower total monthly housing expense as compared to other home loan refinance options.

Mortgage pro

Applies to Non-Owner Occupied Properties

One of the unique features of the VA streamline refinance program is that it applies to non-owner occupied properties such investment or rental properties.  Unlike other streamline refinance programs, with the VA streamline program borrowers are only required to certify that they previously occupied the property being refinanced but they do not need to currently live in the home.  This allows borrowers to use the VA streamline refinance program with homes they previously lived in but that are now income properties or second homes.


Use our free mortgage quote form to compare VA loan refinance quotes from top-rated lenders. Our quote form is easy-to-use, personalized and does not affect your credit score.  Comparing mortgage quotes save you money and helps you find the VA loan that is right for you.

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VA Streamline Refinance (IRRRL) Cons

Mortgage pro

Loan Restrictions

The VA streamline refinance program imposes several restrictions on loan terms.  First, the mortgage you refinance must be an VA loan, which is why a VA streamline refinance is also called a VA to VA refinance .  If you do not have a VA mortgage you can still refinance your existing loan with a VA loan, assuming you are eligible for the VA program, but you cannot use the VA streamline refinance program.  Second, unless you are refinancing from an adjustable rate mortgage (ARM) into a fixed rate mortgage, your new loan must have a lower interest rate than your existing mortgage.  Additionally, your new mortgage balance can only increase by the one-time VA funding fee, any late fees and standard closing costs plus a maximum of two discount points to lower your interest rate.  Borrower can pay for closing costs out of pocket or use a "no cost" loan, which usually means you pay a higher mortgage rate, although your new rate still needs to be lower than your current rate.  Cash-out refinances are not allowed using the VA streamline refinance program although borrowers can include up to $6,000 in loan proceeds for energy efficiency home improvements.

Mortgage pro

VA Funding Fee

The VA streamline refinance program requires that borrowers pay a one-time, upfront VA funding fee.  The VA funding fee for a VA streamline refinance is 0.5% of the loan amount.  The funding fee can be added to the loan amount or paid out of pocket.  For example, for a $250,000 loan amount, the upfront funding fee for a VA streamline refinance is $1,250 ($250,000 * 0.005 = $1,250).

More FREEandCLEAR Resources

Mortgage Guides

VA Streamline Refinance (IRRRL) Guide

Review our comprehensive overview of the VA streamline refinance program including borrower qualification requirements, key mortgage terms and other important program information such as property eligibility guidelines.

Resources

VA Mortgage Rates

VA streamline refinances are provided by traditional lenders such as banks, mortgage banks, mortgage brokers and credit unions.  Use our VA mortgage rate table to review updated VA mortgage rates and fees for lenders in your area.  Even if your current lender offers VA streamline refinances you are not obligated to work with that lender when you refinance and you should shop lenders to find the mortgage with the best terms.  Comparing rates from multiple lenders is the best way to save money on your mortgage.

Resources

Mortgage Refinance Assistance Programs

Review our comprehensive summary of government-backed and conventional mortgage refinance assistance programs.  These programs are designed to help borrowers efficiently and cost-effectively refinance into more affordable and manageable mortgages.

Mortgage Calculators

VA Mortgage Calculator

Use our VA Mortgage Calculator to determine how much home you can afford with a VA mortgage based on your income, debt and other factors.  The calculator also indicates the VA loan limit in your county as well as the upfront VA funding fee based on your down payment and class of military service.

Sources

VA Streamline Refinance (IRRRL): https://www.va.gov/housing-assistance/home-loans/loan-types/interest-rate-reduction-loan/

About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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