Do you have a VA loan (a loan backed by the Veteran’s Administration)?
If so, you might want to think about refinancing. That’s because interest rates have dropped and you may be able to obtain a lower interest rate. The reduced rate could then help you achieve lower monthly payments.
The program is called VA Interest Rate Reduction Refinance Loan or VA IRRRL. Here’s how it works.
To apply for an IRRRL, you may not need an appraisal or credit score. You may refinance the loan with “no money out of pocket” by including all costs in the new loan. However, you cannot receive any cash from the refinance loan proceeds.
VA IRRRLs must pay off a VA loan that meets all of the following requirements.
The loan must be current, and the veteran cannot be more than 30 days past due during the six months preceding the new loan’s closing date.
In addition, the IRRRL loan must close seven months after the closing on your original loan or you must have made six full monthly payments on the original loan.
Your lender will need to do a bit of math up front before the refinance can take place. Let’s say you spend $4,000 on closing costs to refinance with the IRRRL program. You will need to demonstrate you can save up to $4,000 in monthly payments over the next 36 months.
Why? The bank and the VA need to know you will benefit from the loan refinance and see savings in a short time period.
During an IRRRL refinance, you may also change from an adjustable rate mortgage to a fixed rate. So, even if interest rates shift over time, your refinance fixed rate will remain the same over the term of the loan.
As a final point, the veteran or the spouse of an active service member must certify he or she previously occupied the property as his or her primary residence. This is different than the requirement for non-IRRRL VA loans where the veteran must intend to occupy the property as his or her primary home.
There are many valuable reasons to explore the IRRRL program. If you have a VA loan and considered refinancing before, take a hard look at this opportunity and contact a local mortgage lender with any additional questions.
Shikma Rubin is a loan officer at Tidewater Home Funding in Chesapeake. She enjoys the chance to lead workshops and webinars on how to buy a home in 2019. Have mortgage questions? You can reach her at srubin@tidewaterhomefunding.com or 757-490-4726.