VA Streamline Refinance (VA IRRRL): What Is It And How Does It Work?

The VA loan program allows eligible veterans, active-duty service members, reservists, National Guard personnel and qualifying surviving spouses access to mortgage options without a down payment or private mortgage insurance. Millions of military veterans and active personnel have taken advantage of this unique housing benefit from the Department of Veterans Affairs (VA).

But what happens if you have a VA loan and you’re having trouble making your monthly payments? A VA Interest Rate Reduction Refinance Loan (IRRRL, pronounced “earl”) may help you refinance to a lower interest rate.

Let’s take a look at what a VA IRRRL is, the pros and cons of a VA IRRRL loan and whether it’s a good choice for your situation.

What Is A VA IRRRL?

A VA IRRRL is also referred to as a VA Streamline, and the terms are often used interchangeably. Lenders use the term “streamline” to imply that the IRRRL process is simpler and faster than other types of refinancing options.

VA Streamlines can help you switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, lower your monthly interest rate or change your repayment term. You must have an existing VA loan to undergo a VA Streamline.

If you wish to convert your home equity to cash, you must undergo the full VA cash-out refinance process.

How Does A VA Streamline Refinance Work?

The word “streamline” is lender-speak for a simplified and less expensive refinance process. Remember, when you apply for a full refinance, you’re essentially undertaking the same process you went through when you bought the home. That includes a new appraisal, new title search and new recording fees.

With a streamlined process, there’s often no new appraisal and underwriting is often simplified. Your lender may require a minimum credit score and employment verification, but the VA doesn’t. As long as you’re up to date on your mortgage payments, you should be approved for a streamline loan.

You will need to get a new title search performed, and purchase a new title insurance policy for the lender. The streamlined process moves quickly, and the closing costs can typically be rolled into the new loan.

When Can You Use a VA IRRRL?

The VA will only allow you to take advantage of a VA Streamline refinance of your loan if the new terms provide you with an immediate financial benefit, such as a lower interest rate or a lower monthly payment. You can’t refinance your loan just because you don’t like your current lender or for any reason that doesn’t directly relate to your finances.