What Is IRRRL
The Interest Rate Reduction Refinance Loan (IRRRL) is a VA-backed refinancing program that lets veterans with existing VA home loans lower their interest rate without a new appraisal, credit check, or medical exam. The VA charges a funding fee of 0.55% of the loan amount for most borrowers using the IRRRL benefit a second time, or no fee if it's your first IRRRL use.
Veterans often use IRRRLs when market interest rates drop significantly below their current mortgage rate. The break-even point typically occurs within 2 to 3 years of closing, depending on your new loan terms and closing costs. For example, if you refinance from a 5% rate to 3.5%, you could save $200 to $300 monthly on a $300,000 loan balance.
Eligibility and Requirements
You must have an existing VA-guaranteed home loan to qualify for an IRRRL. The new interest rate must be at least 0.5% lower than your current rate, though some lenders require a full 1% reduction to justify the refinancing costs. You'll need to be current on your existing VA loan payments with no more than one 30-day late payment in the past 12 months.
You do not need a Certificate of Eligibility for an IRRRL since you already proved your VA eligibility when you obtained the original VA Home Loan. However, your lender will verify your entitlement is still available and that your property remains your primary residence.
The IRRRL Process
- Application: Submit an application to a VA-approved lender. You'll provide basic income and employment information, but typically no employment verification or recent tax returns are required.
- Appraisal: No appraisal is needed. The VA uses the lesser of your previous appraisal value or the new purchase price as the property value, which speeds up the process significantly.
- Underwriting: The lender reviews your creditworthiness and loan details. Most IRRRLs close in 15 to 30 days, compared to 45 days or longer for conventional refinances.
- Closing: You sign closing documents and pay closing costs, typically ranging from $800 to $2,500 depending on your loan amount and lender fees.
Common Questions
- Can I roll closing costs into the loan? Yes. Most lenders allow you to finance closing costs into the new IRRRL balance, though this increases the total amount borrowed and extends the loan payoff timeline.
- How many times can I use my IRRRL benefit? Unlimited. You can refinance as many times as you want as long as you have available VA entitlement and the rate reduction meets lender requirements.
- What if I'm behind on my current VA loan? You must be current or bring the loan current before closing. If you're more than 30 days delinquent, most VA lenders will decline your application.