If you’re looking for a tricky (if somewhat unusual) tongue twister, saying VA interest rate reduction refinance loan five times fast can certainly be a challenge. However, if you’re really interested in getting a better deal on your monthly mortgage payment, then you might be better served by slowing things down and taking a closer look at the ins and outs of this version of the VA loan.
The VA Interest Rate Reduction Refinance Loan
VA interest rate reduction refinance loan is quite a mouthful, which may be part of the reason this loan is often referred to as either an IRRRL, a VA-to-VA loan, or a streamline refinance. Of course, the speed and convenience associated with this particular loan probably also played a role in landing it that third nickname.
Why do people choose the IRRRL? Why is it considered a streamlined option? Who can use the IRRRL? Are there other VA refinancing loans? Let’s explore . . .
Why opt for an IRRRL?
The VA created the IRRRL to fill a specific need. If you are a homeowner who purchased your home with a VA loan and wants to either lower your monthly mortgage payments by securing better loan terms or swap from an adjustable-rate mortgage to a fixed-rate mortgage, the IRRRL is your chance to do so. When you refinance, you will replace your old VA loan with a new VA loan.
What makes an IRRRL streamlined?
As Forbes reports, a borrower who uses an IRRRL usually won’t need an appraisal, a credit check, or underwriting. Since those all normally require significant time and money, eliminating the requirements for them truly does make the VA streamline refinance a relatively fast and easy way to reduce or stabilize your monthly mortgage payment.
Who is eligible to use an IRRRL?
The IRRRL is not an option for everyone. As the VA explains, anyone who hopes to use this form of financing must meet every item on a brief list of qualifications. For starters, you must already have a VA home loan. Next, you must plan to use the IRRRL to refinance your existing VA home loan. Also, you must be prepared to attest that you either now live in or used to live in the home that is the focus of the loan. What if you have a second mortgage on your home? An IRRRL may still be an option. In this situation, the entity holding your second mortgage must agree to accept your new VA-backed loan as your first mortgage.
IRRRL Pros and Cons
What are the pros and cons of an IRRRL? As Military.com reports, these loans do offer an easy way for eligible borrowers to refinance their existing VA loan and secure a lower or more stable monthly mortgage payment. That can result in significant savings over the life of the loan and reduce your stress. The reduced paperwork requirements and option to roll your closing costs into the loan can simplify things even further. Their relaxed housing rules are also a boon for some borrowers. While most VA loans require borrowers to live in the home, the IRRRL can be used for either current or past residences. However, there are some drawbacks to IRRRLs. If you don’t have a VA loan, you can’t use an IRRRL. And if you’re interested in cashing out some of your home equity, that’s unfortunately not an option with an IRRRL.
Other VA Refinancing Options
If an IRRRL is not a good fit for your situation but you hope to use a VA loan, there is another choice. According to the VA, its VA cash-out refinance loan can be used to refinance from a non-VA loan into a VA loan. It can also be used to turn your home equity into cash. However, the approval process for the cash-out refinance loan will be more demanding than the one for the IRRRL.
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