Interest Rate Reduction Refinance Loan (IRRRL)

The Interest Rate Reduction Refinance Loan (IRRRL) allows veterans to refinance an existing VA-backed home loan to a lower interest rate with minimal paperwork and hassle. It is one of the simplest refinance options available to any borrower.

The IRRRL is designed to do one thing: reduce your monthly mortgage payment by lowering your interest rate (or switch you from an adjustable-rate mortgage to a fixed-rate mortgage). It is not designed for taking cash out of your home — that requires a separate VA Cash-Out Refinance.

• No appraisal required in most cases — the lender does not need to determine your home's current market value
• No credit underwriting package required in most cases — significantly less paperwork than a standard refinance
• Can be done with no out-of-pocket costs — closing costs and the VA funding fee can be rolled into the new loan balance
• No income verification required in many cases
• No new Certificate of Eligibility needed — your existing VA loan serves as proof of eligibility
• Can be completed quickly — some IRRRLs close in as little as 30 days

• You must currently have a VA-backed home loan. You cannot use an IRRRL to refinance a conventional, FHA, or other non-VA loan. (For that, you need a VA Cash-Out Refinance.)
• You must certify that you currently live in or previously lived in the home secured by the loan being refinanced.

The VA requires that every IRRRL provide a "net tangible benefit" to the veteran. This means the refinance must result in at least one of the following:

• A lower interest rate than your current VA loan
• A switch from an adjustable-rate mortgage to a fixed-rate mortgage (even if the initial rate is slightly higher)

A refinance that increases your interest rate and keeps you on a fixed rate will not pass this test and will not be approved.

To prevent "loan churning" (repeated unnecessary refinancing), the VA imposes seasoning requirements:

• At least 210 days must have passed since the first payment on your current VA loan
• At least 6 monthly payments must have been made on your current VA loan

Both conditions must be met before a new IRRRL can close.

The VA funding fee for an IRRRL is 0.5% of the loan amount. This is significantly lower than the funding fee for a purchase or cash-out refinance.

• The fee can be rolled into the new loan balance (no out-of-pocket cost)
• Veterans with a 10% or higher VA disability rating are exempt from the funding fee
• Surviving spouses receiving DIC are also exempt

You cannot receive cash back from an IRRRL. The new loan amount can only include the existing loan payoff amount, the VA funding fee, closing costs, and up to two discount points. If you need to tap your home equity for cash, you must use a VA Cash-Out Refinance instead, which has different requirements (appraisal, credit underwriting, higher funding fee).

• Predatory lenders targeting veterans: Some lenders send unsolicited mailers, emails, or phone calls aggressively pushing IRRRL refinances. Be skeptical of anyone who contacts you unsolicited. Never feel pressured to refinance.
• Churning: The VA has cracked down on "churning" — lenders who push repeated refinances to generate fees at the veteran's expense. The seasoning requirements exist because of this problem.
• Compare multiple lenders: Just because the IRRRL process is simple does not mean you should go with the first lender who contacts you. Shop around — rates and closing costs vary significantly.
• Watch for fees rolled into the loan: Rolling closing costs and the funding fee into the loan is convenient, but it increases your total loan balance. Make sure the interest savings outweigh the added costs over the time you plan to keep the home.
• Escrow shortages: If property taxes or insurance have increased since your original loan, your new monthly payment may not drop as much as expected (or could even increase) despite a lower interest rate.

• VA IRRRL Overview
• VA Home Loans Program