IRRRL stands for the Interest Rate Reduction Refinance Loan and is the VA program’s most commonly used refinance product. It is also known as a VA to VA loan because it is only available for those who already have an existing VA loan and is used to refinance the current mortgage to a lower rate, shorter term or adjustable to fixed rate. Just like the original VA loan, the IRRRL is designed to make it easier for VA mortgage holders to save money.
- The monthly mortgage payment for the IRRRL must be lower than the payment for the original VA loan. This requirement is not mandatory when refinancing from an adjustable rate mortgage to a fixed rate loan, or when reducing the term of the mortgage.
- There is much less documentation and very little paperwork required with the VA IRRRL.
- The closing costs for the IRRRL can be added to the loan amount which means that the borrower can refinance with no out of pocket expenses. In some cases, the borrower may choose for lender paid closing costs which usually is done through a slightly higher mortgage rate.
- There is minimal credit underwriting with an IRRL. Income verification is generally not needed.
- VA does not require an appraisal with the IRRRL.