The VA Interest Rate Reduction Loan, known as IRRRL or VA streamline, serves as a program designed for veterans seeking to refinance their existing VA mortgage. As the name suggests, this program offers a simplified route for refinancing, allowing borrowers to minimize the paperwork involved in the process. With the IRRRL, eligible veterans have the opportunity to achieve a lower interest rate, reduce loan payments, and shortening the term of their existing mortgage. By doing so, veterans can potentially save significant amounts of money over time. As a result, the VA streamline program is a popular choice among veterans looking to secure a more favorable mortgage refinancing solution.
An appraisal to determine the market value of the property is usually not required.
The typical underwriting procedure to verify income and assets is typically not required.
Closing cost and new escrow accounts, for taxes and insurance, can be financed into the balance of the new mortgage. Also, no closing cost options are available depending on market conditions.
The Department of Veterans Affairs provides numerous options for individuals seeking to maintain their current payment term, extend it, or even decrease it. For instance, let's say you have been diligently paying for 7 years on a 30-year loan; in that case, you could look into refinancing with a 23-year term.
Veterans subject to VA Funding Fees are reduced to.5% instead of the full rate applicable on purchase or cashout refinance mortgage. Disabled veterans with a service connected disability rating with the VA are exempt.
The VA program is unique in that it provides the opportunity for veterans to utilize their benefits towards investment or secondary properties, rather than solely requiring the property to serve as their primary residence.
A loan that provides a net tangible benefit means that it is in the financial interest of the Veteran. The following standards are required.
Loan seasoning applies to all streamline refinancing VA loans. A loan is considered seasoned if both of the following conditions are met as of the date of loan closing:
It is imperative to note that the VA loan must be secured by a first lien on the property. Therefore, it is not possible for the lien to take a subordinate position or be placed behind a senior lien.
Recoupment describes the length of time it takes for a Veteran to pay for certain fees, closing costs, and expenses that were necessitated by the refinance loan. The recoupment standard applies to all IRRRLs. This includes, but is not limited to, IRRRLs where the principal balance is increasing, the term of the loan is decreasing, or where the loan being refinanced is an adjustable-rate mortgage (ARM).
Income and credit underwriting is not mandatory for a Veteran’s Interest Rate Reduction Refinancing Loan (IRRRL) unless there is a significant increase of more than 20% in the principle interest taxes and insurance (PITI) payment.
Cashback exceeding $500 during closing is not allowed for an IRRRL. However, an exception is made if the Veteran is being reimbursed for the cost of energy efficient improvements up to $6,000 within 90 days prior to the closing date.
Generally, the borrowers obligated on the original loan must be the same on the new loan (and the veteran must still own the property). However, there are instances where changes in borrowers are acceptable, as highlighted in the table in this subsection. Please refer to it for sample cases.
| Parties Obligated on Old VA Loan | Parties to be Obligated on new IRRRL | Is IRRRL Possible |
| Unmarried veteran | Veteran and new spouse | Yes |
| Veteran and spouse | Divorced veteran alone | Yes |
| Veteran and spouse | Veteran and different spouse | Yes |
| Veteran alone | Different veteran who has substituted entitlement | Yes |
| Veteran and spouse | Spouse alone (veteran died) | Yes |
| Veteran and nonveteran joint loan obligors | Veteran alone | Yes |
| Veteran and spouse | Divorced spouse alone | No |
| Unmarried veteran | Spouse alone (veteran died) | No |
| Veteran and spouse | Different spouse alone (veteran died) | No |
| Veteran and nonveteran joint loan obligors | Nonveteran alone | No |
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