An Interest Rate Reduction Refinancing Loan, IRRRL, may be the ideal solution for veterans to lower their monthly outgo on their home mortgage loan. With no qualifying on credit or income, (please note exceptions below), this loan should lower the veteran’s interest rate and payment from one VA guaranteed mortgage loan to another. The new loan must be at a lower interest rate than the existing loan unless the loan being refinanced is a VA Adjustable Rate Mortgage.
Generally, no credit, income or underwriting is required to close the loan automatically. As stated above, there are exceptions that will be covered at the end. The IRRRL must have a lower principal and interest (P&I) than the current loan, unless an ARM is being refinanced, the new loan is a shorter term or energy efficiency improvements are included in the IRRRL.
The closing costs may be financed in an IRRRL but no appraisal is required. If the payment increases by 20% or more due to any of the reasons above, the income and debts must be underwritten. A statement showing how long it will take to recoup all closing costs (both included in the new loan and any paid outside of closing) must be signed by the veteran, acknowledging the effect of refinancing the loan.
NOTE: If the current loan is delinquent, it is still possible to refinance under this program but will require pre-approval from the VA. In the case of a delinquent loan refinance, late payments and late charges, plus reasonable costs if legal action has commenced may be added to the loan. The program is not one that can be done without income verification.
It is possible to do an IRRRL for a veteran and new spouse, the widowed spouse of the veteran, the veteran and a different spouse, the divorced veteran alone but not for the divorced spouse alone or the widowed spouse if she/he was not on the original loan. There could be income requirements on these exceptions.
IRRRL are available for properties that are not currently occupied by the veteran or spouse of an active service member if he or she previously occupied the property as his or her home.
It is possible that an IRRRL would create significant savings for a veteran, in today’s falling rate environment,. The only way to find out is to check with a mortgage professional such as me. I would be happy to run the numbers and see if this is something that will save you money on your mortgage. Just because it might lower your payment, is not necessarily the right thing to do. It is always better to see what the cost of the loan will be and how long it will take to recoup those costs. That is where I come in; I will work those costs out for you and give you insight as to what should work for you.
