VA IRRRL
VA loan dashboardA VA-to-VA refinance, usually at a lower rate, usually with no appraisal or income check. See the new loan and whether it meets VA's three tests.
How this tool works
The new loan. An IRRRL can be the payoff of the VA loan you have, plus closing costs, up to two discount points and prepaid items, plus the 0.5% VA funding fee. When the lower rate comes only from points added to the loan, one point or less needs the loan at 100% of the home's value or less, and more than one point needs 90% or less, which usually means an appraisal. Veterans receiving VA disability compensation, eligible surviving spouses and active-duty Purple Heart recipients pay no funding fee. With the costs added, little or no cash is due at closing.
The rate test. Fixed to fixed, the new rate must be at least 0.50 percentage point lower. Fixed to adjustable, at least 2 points lower. VA sets no rate drop for an adjustable-rate VA loan moving to a fixed rate.
The recoup test. Fees, closing costs and discount points must be paid back by the drop in principal and interest within 36 months, whether you pay them at closing or add them to the loan. The funding fee, taxes, insurance, escrow and other prepaid items are left out. If the payment does not drop, no fees may be charged.
Seasoning. The new loan can close once 210 days have passed since the first payment due date of the loan being refinanced and six monthly payments have been made.
A new 30-year term does not mean 30 more years of payments. It sets the longest the loan can run, not how long you have to take. Keep paying what you pay today, and the difference goes to principal, so at the lower rate the new loan can be paid off on or before the date your current loan would end.
Sources: 38 U.S.C. 3709, 38 CFR 36.4307, VA Circular 26-19-22, VA funding fee.
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