If you secure an IRRRL, you'll likely be securing one of the lowest interest rates out there. While you'll want to research current mortgage rates and consider a few different lenders in order to find the best IRRRL rate available, you'll also want to understand the advantages and disadvantages when it comes to securing a VA IRRRL. The VA Streamline refinance program offers many benefits over other refinance options. Lower Interest Rate The most common reason why veterans and their family members refinance their VA loans is that they’d like to secure a lower interest rate. The VA strongly prefers that borrowers seeking a VA IRRRL secure a lower interest rate than their original mortgage loan has, unless the loan they are refinancing is an ARM. Lower Monthly Payments When it comes to how refinancing works with a VA Streamline, your monthly payments often decrease. Lower monthly payments may result from an extended term on the loan, which allows more time to pay on your mortgage. A lower interest rate could also result in a lower monthly payment if the length of the loan is held equal.VA IRRRL Streamline Refinance Pros
Lower Funding Fee
The VA loan program requires borrowers to pay an upfront funding fee that can either be paid at closing, offset with a lender-paid credit, covered by the seller as a concession (where a seller agrees to pay partial closing costs) or rolled into the loan balance.
The amount of the funding fee on a regular VA loan is anywhere between 1.25% and 3.3% of the loan amount depending on service status, down payment amount, if it’s your first time using a VA loan and whether it’s a purchase or refinance. For a VA Streamline, the funding fee is 0.5% of the loan amount in all circ*mstances.
Potential Change In Mortgage Structure
As a reminder, refinancing with a VA Streamline could allow you to move from an adjustable-rate mortgage to a fixed-rate loan. ARMs change over time, depending on rate fluctuations. Fixed-rate mortgages lock in a single interest rate until you pay off your loan.
VA IRRRL Streamline Refinance Cons
There are some costs and limits to a VA Streamline to consider.
You Must Be Current On Your Mortgage
You must be current on your mortgage payments. This means that you can’t be more than 30 days late on a payment in the last 6 or 12 months depending on how you qualify.
It’s Only Applicable To Your Current Property
As we discussed above, only service members or qualifying surviving spouses with current VA loans can take advantage of a VA IRRRL and that refinance is only applicable to the loan on your current home. You may change mortgage lenders or your mortgage specifics, not your actual property. This means you can’t switch this loan into a new property; it must be refinanced into the property you purchased with the VA loan you’re now refinancing.
Strict Eligibility Requirements
To qualify for a VA Streamline, you must have a VA loan to begin with. You’ll need to be in good standing with your lender, current on your mortgage payments and be able to prove that the refinance will lower your interest rate. Some borrowers may not be able to meet these requirements.
Closing Costs
With closing costs also comes VA IRRRL funding fees. A borrower can choose to roll over these costs into their new loan balance, which means they’ll still be paying for them with interest on top.
Mortgage Length
VA loan refinances are flexible, and there’s no rule that says you must extend your mortgage. Depending on the situation, you might have a longer mortgage length – and it might take a longer time to pay off. This could be a negative for some borrowers.
Seasoning Required
It’s important to note that you must have made six consecutive monthly payments on your loan, and there must be 212 days between your first mortgage payment and the closing on the VA Streamline.
