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In a sea of government abbreviations and acronyms, here is one that you will want to remember if you are shopping for a VA refinance: IRRRL. The interest rate reduction refinance loan, or IRRRL, is a financial solution to high interest rates. With this type of VA-issued loan, you can refinance your current VA mortgage at a lower interest rate, and as a result reduce your monthly payments. An IRRRL is a concrete way to deal with the high cost of living and the growing expenses of your family.
At this time, we are in a period of historically low interest rates. Although they are currently a bit higher than they were a year ago, today’s rates, which average 3.5 to 4.5%, are nearly two percentage points less than they were five or 10 years ago and about half of what they were 15 or 20 years ago when they were more than 7 or 8%. As a Veteran, you have the right to take advantage of these economic changes with a quick and easy IRRRL.
To obtain one of these loans you must meet the requirements of the Veterans Administration. The VA backs 25% of the loan, but does not require that you obtain a new Certificate of Eligibility, a new credit review, or new appraisal on your property. The lender may require that you verify income, that you have made your mortgage payments on time for the last 12 months, and that the value of your house is in line with the amount of the loan, but these requirements reflect internal loan policy. As long as you can pay your loan, you are free to shop for a lender with more lenient rules for an IRRRL.
The IRRRL carries the benefits of your original VA loan. Though there is a small VA funding fee, you need no money down nor any private mortgage insurance. Also, there is no prepayment fee, so if you want to take some of the money you are saving in interest and apply it to your loan, you can pay it off more quickly.
What an IRRRL does is give you the benefits of lower interest rates and lower payments. Although you cannot get any cash back from this type of loan, except for improvements in energy efficiency, you still have more money in your pocket to pay for other expenses. If your new lower interest rate mortgage saves you $100-$200 per month, you can easily save this and apply it toward the new roof you need or your child’s college tuition. Over the course of the loan, you save thousands of dollars in interest. Since you are not allowed to increase the amount of the loan, except for advances you have made for energy-efficiency improvements, the loan fee, or closing costs, you are just paying off the amount you originally borrowed.
You really get the effect of lowered payments since you have not increased the amount of the loan.
While lenders usually require you to prove that you have a good payment history, having a lower payment increases the likelihood that you will be able to make the payments on time. Even if your job situation changes and you have to rely on less income, reduced payments will help you make it even in times of financial adversity.
Many veterans use this loan to transfer out of an adjustable rate mortgage (ARM) that promised low initial rates that vary with the market. While homeowners with ARM loans may have benefited over the last year or two of low interest rates, they always live under the fear of potential spikes in the interest rate. An IRRRL offers the financial certainty and security of a fixed rate loan.
An IRRRL is the ideal hassle-free loan, but can you qualify? Only Veterans, enlisted personnel, and others who meet special requirements are able to tap into this benefit. Typically, those who have served must have contributed 90 days during wartime or 180 days during peacetime, while current enlistees must serve 90 days. Reservists and National Guard members need to have six years of service under their belts. Other eligible persons include those who were discharged at the request of the government or for hardship, reduction in force, certain medical conditions, or disabilities, along with surviving spouses of service members who were killed or disabled in action, missing in action, or prisoners of war. Veterans have already put up with danger and inconvenience, so FortressVALoans.com will do all it can to administer your IRRRL loan quickly.
Since you have already proved eligibility and passed lender qualification measures for your original home loan, an interest rate reduction refinance loan, also called an IRRRL or a streamline refinance loan, can get you a new interest rate in record time.
While lenders can impose some conditions on an interest rate reduction refinance loan, the VA:
Since it is lenders who might impose additional requirements, or “overlays,” on interest rate reduction refinance loans, you may need to shop for a lender with policies that meet your needs. Some lenders do not pull a credit report for this type of loan and of the ones who do, some are more lenient than others. If you have credit issues, find a lender who will give you some slack. You are still responsible for paying the mortgage and the VA is willing to give you the benefit of the doubt. You just need to find a lender who will too.
The purpose of this loan is to decrease your interest rate and put you in a better financial position. For this reason, the VA will not approve the loan unless it will help you out with a lower interest rate and lower payments. The only exceptions to this are if you are refinancing into a shorter-term loan, financing energy improvements to your home, or refinancing from an adjustable-rate mortgage (ARM). FortressVALoans.com will show you a chart that lays out the benefits of the refinance for you and what our particular lender requirements are.
An interest rate reduction refinance loan has some other rules that differ from VA cash out refinance loans that might be of interest to you:
When you obtained your original VA purchase loan, you were required to be the primary occupant. An interest rate reduction refinance loan enables you to turn a property into rental property, which is ideal if you have been transferred to another area or need to buy a larger home for your family.
An interest rate reduction refinance loan can give you not only the lower payments you need as a result of the lower interest rate, but also offers additional flexibility. The loans are easy for lenders to process and can close in about 10 days.
Even if a swarm of abbreviations and acronyms can make your head spin, IRRRL is one worth remembering and utilizing. If you are a veteran with a VA loan, FortressVALoans.com wants to help you claim this benefit. Just give one of our loan specialists a call at (855) 383-5002 or apply on our website. We can turn IRRRL into financial relief in about 10 days.