When Does a VA IRRRL Make Sense?
A VA Interest Rate Reduction Refinance Loan, commonly called an IRRRL or VA streamline refinance, can make sense when an eligible borrower can improve the existing VA loan in a way that justifies the cost and meets applicable VA requirements. The decision should be based on the new payment, rate, costs, recoupment and how long you expect to keep the loan, not simply whether the advertised rate is lower.
What an IRRRL Is
An IRRRL is a VA refinance option designed for an existing VA-backed loan. It is
generally used to replace that VA loan with a new VA loan under the applicable
streamline-refinance requirements.
Although the process can be simpler than a purchase or some other refinances, it is
still a new mortgage with terms and costs that should be evaluated.
What to Compare
Monthly payment change
How much does the new principal-and-interest payment change, and are there other payment components that need to be considered?
Closing costs and recoupment
Understand the costs of the refinance and how long it takes for the monthly savings to recover applicable costs.
Rate and loan term
A lower rate is useful only in context. Look at the new loan term and the total strategy, not the rate in isolation.
How long you expect to keep the loan
If you expect to sell, PCS, refinance again or pay the loan off soon, the time horizon matters.
Jason's Take
A VA IRRRL should solve a math problem, not create a marketing win for a lender. I want to know what you save, what it costs, how quickly you recover those costs and how the refinance fits your plans.
Reviewed by Jason Stier
Jason Stier is the VA Loan Boss, founder of Veteran Community Mortgage and a VA loan educator with more than two decades of mortgage-industry experience. His work focuses on helping Veterans, military families and housing professionals better understand the VA home loan benefit.
Have a VA Loan Question? Start With the Strategy.
Every VA loan scenario is different. The next step is understanding how the benefit, your finances and your plans fit together.
