What is the IRRRL?
An IRRRL refinances a VA-backed home loan into a new VA-backed loan. You can use it to lower your monthly payment through a lower rate, or to get a more stable payment by moving from an adjustable or variable rate to a fixed rate.
Who qualifies
- You already have a VA-backed home loan, and the IRRRL refinances it.
- You can certify that you live in the home now or used to live in it.
- If there's a second mortgage, its holder agrees to let the new VA loan be in first place.
The federal rules (38 CFR 36.4306)
| Rule | What it requires |
|---|---|
| Seasoning | The later of 210 days after the first monthly payment or the sixth monthly payment on the loan being refinanced |
| Recoupment | Fees and costs must be scheduled to be recouped through lower monthly payments within 36 months |
| Fixed to fixed | New rate at least 0.50 percentage points (50 basis points) lower |
| Fixed to adjustable | New rate at least 2 percentage points (200 basis points) lower |
| Net tangible benefit | The loan must be in your financial interest, such as a lower payment, shorter term, lower rate or moving from an ARM to a fixed rate |
The lender must also give you a comparison of the old and new loans at application and at closing.
Closing costs and the funding fee
You can roll closing costs into the new loan, or take a slightly higher rate so the lender covers them. The VA funding fee for an IRRRL is 0.5%, unless you're exempt, for example if you receive VA compensation for a service-connected disability.
Worked example: does it pass recoupment?
A $250,000 balance at 7% with 30 years left: principal and interest $1,663.26. Refinance at 6% with $4,000 of costs rolled in, a new $254,000 loan over 30 years: $1,522.86.
Recoupment = $4,000 ÷ $140.40 = 28.5 months
28.5 months is within 36, so this passes. At 6.25% instead, the saving would be about $99 a month and recoupment about 40 months, which fails. Restarting a 30-year term also adds years of payments, so compare total interest too. Run yours with the VA IRRRL calculator or the refinance calculator.
IRRRL vs FHA Streamline Refinance
| VA IRRRL | FHA Streamline | |
|---|---|---|
| Refinances | An existing VA loan | An existing FHA loan |
| Seasoning | Later of 210 days from first payment or 6 payments | At least 6 payments, 6 months since the first payment due date, and 210 days since closing |
| Benefit test | Net tangible benefit and 36-month recoupment | Net tangible benefit (lower rate and/or term change) |
| Appraisal | Ask your lender | Not required |
| Cash out | Not the purpose; VA has a separate cash-out refinance | No cash out allowed |
| Credit check | Lender rules | Credit-qualifying and non-credit-qualifying versions |
Rates on either depend on the market and your lender. Calcist doesn't show live rates; get Loan Estimates from several lenders on the same day to compare. See what APR includes.
Sources: VA: Interest Rate Reduction Refinance Loan; 38 CFR 36.4306; VA Home Loan Buyer's Guide (funding fee); FDIC Affordable Mortgage Lending Guide: streamline refinance (summarizing HUD Handbook 4000.1).
Every worked example on this page was checked with Calcist's own engine and an independent reference.