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VA Streamline IRRRL & Cash-Out Refinances

Types of VA Home Refinances

  • A VA IRRRL or VA Streamline Refinance – A simple, streamlined refinance of an existing VA loan into a lower interest rate & monthly payment.

  • A VA Cash-out Refinance – A refinance of a non-VA mortgage or a refinance of an existing VA Loan which allows the borrower to receive cash back from the equity of the property.

What is a VA Streamline IRRRL?

  • VA Streamline Refinance (Non-Credit Qualifying) –  VA IRRRL

    • IRRRL stands for:  Interest Rate Reduction Refinance Loan

    • An  RRRL is a VA-guaranteed home loan designed to refinance a borrower out of an existing VA home loan.

    • Generally the new VA loan will have a lower interest rate & lower principal and interest payments than the existing VA loan.

    • You can also refinance your VA Home Loan from a higher risk loan product – ie. an ARM (Adjustable Rate Mortgage) to a lower risk product (Fixed Rate Mortgage).

    • This type of VA Loan is often referred to as a Streamline because it features so little paperwork.

    • VA Streamlines generally also feature little or no closing costs.

What are the Key Features of a VA Streamline Refinance – IRRRL Home Loan?

  • No appraisal required.

  • No underwriting of income.

  • No underwriting of assets.

  • No debt ratio calculation.

  • No money out of pocket.

    • Closing costs can be rolled into the new loan amount; Or

    • Lender Paid Closing costs – by electing a higher interest rate.

  • You need only to show the prior occupancy of your property.  If it is no longer your current primary residence you can still refinance with a VA Streamline Refinance of an Investment Property.

  • When moving from an ARM to a Fixed Rate Loan the interest rate may increase.

  • The VA allows this in order to allow you to move from a riskier home loan product to a less risky one.

  • You can not receive cash-back.

  • To qualify for a VA Streamline Refi you must be refinancing from an existing VA loan.  If, not, then you will use the VA Cash-Out Refinance program for your refinance.

  • Typically the existing VA loan needs to be current or show no more that 1 30 day late in the past 12 months.

  • The VA Streamline Refinance can close quickly because of the relative ease of the process and reduced paperwork.

What is the Net Tangible Benefit Requirement for an VA IRRRL Home Loan?

  • The new P&I payment must be lower on the new VA loan; Unless

    • The new VA IRRRL loan is a fixed rate loan and the original VA loan was an ARM.

    • The term of the new loan is shorter than the term of the loan being refinanced.

      • Ie. from a 30 year fixed VA loan to a 15 year fixed VA Loan.

    • Energy efficiency improvements are included in the IRRRL.

Can my Monthly Payment Increase on a VA Streamline IRRRL Home Loan?

  • An increase in the Veteran’s monthly payment may happen if:

    • You finance closing costs à causing the loan amount to increase à causing the monthly payment to increase.

    • You finance up to 2 discount points à causing the loan amount to increase à causing the monthly payment to increase.

    • You finance the funding fee à causing the loan amount to increase à causing the monthly payment to increase.

    • You elect a higher interest rate to move out of an VA ARM Loan and into a VA Fixed Loan product

    • Your Taxes or Insurance Escrow Amounts have changed and are not yet updated on the existing VA Home loan being refinanced.

Can I Receive Cash-Out on a VA Streamline IRRRL Home Loan?

  • No.  You can’t use a VA Streamline IRRRL to take cash out.

  • To receive cash-out, you would have to qualify under a traditional VA Cash-Out Refinance program which requires traditional credit and underwriting.

  • The one exception is reimbursement for the cost of energy efficiency improvements up to $6,000 that were completed within 90 days preceding the date of closing on the new IRRRL home loan.

What is the VA Funding Fee on a VA Streamline IRRRL Home Loan?

  • Traditionally the Funding Fee for a VA IRRRL = .5%

  • Disabled borrowers may be exempt from the VA Funding Fee.

What Closing Costs Can be Included in the Loan Amount for a VA Streamline IRRRL Home Loan?

  • The VA Funding Fee

  • All allowable closing costs, including:

    • State Fees

    • County Recording Fees

    • Title Insurance Fees

    • Escrow Amounts for Taxes and Insurance

    • Up to 2 discount points (to buy the interest rate down).

    • Lender’s Flat fee charge

  • VA IRRRL Loans currently past due:

    • Must be submitted by your lender to the VA for prior-approval.

    • Late payments and late charges from the old VA Loan can be rolled into the new loan amount.

    • “Reasonable” legal costs initiated to terminate the old loan that had already commenced.

What is the Difference Between an IRRRL and a VA Cash-Out Refinance?

  • Use the VA Cash Out Refinance Program to refinance out of any loan.

    • VA Streamline Refinance – can only be used to refinance an existing VA Loan.

    • VA Cash Out Refinance – can be used to refinance any conventional, FHA, USDA or Jumbo Loan.

  • Use the VA Cash Out Refi Program to take Equity Out of your property.

  • VA Streamline Refinance Vs. VA Cash Out Refi Underwriting Requirements

    • VA Streamline Refis require limited paperwork

    • VA Cash Out Refinances require an Appraisal & traditional credit, income, asset underwriting review.

What are the Key Features of a VA Cash Out Refinance?

  • Eligible for the refinance of a current primary residence only.

  • The VA Cash Out Refinance Program includes two types of refinances:

    • Refinance of a non-VA loan into a VA loan (regardless of whether you are receiving cash-out or not).

    • Refinance of any loan with the purpose of taking Cash Out.

  • The VA Cash Out Refinance Program allows you to refinance up to 100% of your existing mortgage debt (with no cash-out)

  • The VA Cash Out Refinance Program allows you to take actual cash-out up to 85% of the equity of your home.

  • This loan requires an Appraisal and full credit and underwriting documentation (similar to when you purchased your home).

What can I use the Cash Out Proceeds For From a VA Cash Out Refinance Home Loan?

  • Use the cash out from a VA Cash Out Refinance Loan to Pay off Debt

  • Use the proceeds from a VA Cash Out Refinance Loan for Home Improvements

  • Use the cash out proceeds to pay-off a non-VA home loan.

  • Home Improvements, school tuition, emergency nest-egg, and much more!

Refinance Links

Refinance Basics

How Much Equity Do I Need To Refinance?

What Are The Costs To Refinance?

Should I Refinance My Home? 

Rate/Term – No Cash Out Refinance

Debt Consolidation Refinance

Cash Out Refinance

Overview Of The Refinance Process

Important Tips For A Successful Refinance Process  

Refinance Documentation Checklist

FHA Streamline Refinance

VA IRRRL & VA Cash Out Refiances

HARP Refinance

Refinance Calculator

Contact A Refinance Mortgage Expert