If you want to take advantage of a low interest rate while still keeping a VA loan, the VA Streamline IRRRL Refinance is a great option.
Benefits of Refinancing
When using an Interest Rate Reduction Refinance Loan (IRRRL), you can expect your monthly payments to go down. This can sometimes be a significant amount if interest rates have decreased since you initially purchased your home.
Decreasing your interest rate by even half a percentage can amount to large savings over a 30-year loan.
The other reason homeowners and lenders like doing Streamline Refinance loans is how easy they are to complete administratively. You won’t need to provide nearly as much documentation as in other types of refinance loans, which is why it is know as a “streamline” loan.
The borrower usually does not need to pay any costs to complete this type of refinance and the VA will often not require an appraisal. This can amount to a lot of savings at closing.
Limitations of the Streamline Refinance
The VA Streamline Refinance option can only be used on a home that is already financed using a VA loan.
There is often a seasoning period, required by the lender. This means that you must own the home for a certain amount of time before you refinance using the Streamline Refinance loan. Lenders can also set their own guidelines and requirements for credit score, financial stability, and other factors that influence your ability to repay the loan.
Using the VA Streamline Refinance loan, you can still expect to pay a funding fee to the VA at closing. This fee is typically lower than that of an initial VA loan and can be rolled into your loan. It covers the administrative and potential loss costs at the Department of Veterans Affairs to keep the program running. Veterans with a service-connected disability or their surviving spouses are exempt from this fee.
Talking to your lender about your options can help you determine when and if you should consider refinancing.