Guide to VA IRRRL: Streamline Refinance Benefits and Process: Tips for a Successful Refinance

Unlocking the Benefits of VA IRRRL: Your Guide to Streamline Refinancing
Hi, my name is Kevin Retcher. As the owner of First Meridian Mortgage and a veteran myself, I'm here to walk you through one of the most beneficial loans available for veterans: the VA Interest Rate Reduction Refinance Loan (IRRRL), commonly referred to as a VA Streamline Refinance.
Why VA IRRRL is the Best Loan for Veterans
At First Meridian Mortgage, I believe the VA loan is unparalleled. Having utilized it myself, I can attest to its advantages-zero money down, no mortgage insurance, and more. The VA IRRRL, designed for veterans who already own a home, allows for refinancing at a reduced cost while incorporating stringent protections to prevent unethical lending practices like equity stripping.
Key Details of the VA IRRRL
To qualify for a VA IRRRL, your starting point is having a VA loan in place. Here are some crucial aspects:
1. **210-Day Waiting Period**: There is a mandatory 210-day waiting period from the date of your first required payment. Additionally, you must have made at least six payments on your mortgage within this period.
2. **Interest Rate Reduction**: The new interest rate must be at least half a percent lower than your existing rate. For example, if you purchased at a 7% interest rate, it should drop to at least 6.5% to be eligible.
3. **Recouping Closing Costs**: You need to recoup your closing costs within 36 months. The VA established these rules to ensure veterans benefit without falling prey to unethical lending practices.
Benefits of VA IRRRL: Rolling in Costs and Safeguards
One of the most significant benefits of a VA IRRRL is the ability to roll in all closing costs, prepaids, and points into the loan. The VA even allows you to receive up to $500 at closing, no more. This makes refinancing accessible without upfront costs, although it's essential to understand that skipping mortgage payments implies rolling those costs back into the loan.
Best Practices for Streamlining VA IRRRL
Here are a couple of recommended approaches:
1. **Zero Cost Refinance**: Ideally, refinance without rolling any costs into your loan. This can be achieved through credits from the lender to cover all costs, ensuring your principal doesn't increase.
2. **Understand Your Costs**: For example, in Virginia, closing costs for a $600,000 VA IRRRL typically total $4,181 without an appraisal. If you're not exempt from the VA funding fee, the overall costs could exceed $7,000. Understanding these figures is crucial in evaluating your recoup time and overall savings.
The Math Behind VA IRRRL
Currently, with interest rates fluctuating, many veterans with rates as high as 7% might find a streamlined refinance beneficial. Let’s look at some numbers:
- At 6.5%, the lender might offer a credit covering all closing costs.
- At a lower rate of 6.249%, you might recoup closing costs in about six months.
- Higher credits at lower rates mean you start saving money immediately.
The Bigger Picture
Ultimately, doing a VA IRRRL isn't about resetting your loan term; it's about leveraging lower interest rates to save on monthly payments and increase principal payments. For example, dropping from 7% to 6.249% could significantly decrease your term if you continue paying what you used to pay.
Refinancing multiple times as rates drop is not uncommon. Each refinance, done correctly without additional costs, can lead to substantial long-term savings.
Final Thoughts
If you're a veteran with a VA loan purchased within the last two years, now is an excellent time to consider a VA IRRRL:
- Ensure you meet the 210-day and six-payment requirements.
- Aim for at least a 0.5% reduction in interest rates.
- Strive to recoup costs within 36 months.
- Avoid getting trapped by offers of "skipped payments" which only roll costs into the loan.
As a veteran-owned business specializing in VA loans, First Meridian Mortgage is committed to supporting you through the process with unparalleled expertise. Feel free to reach out to me for personalized advice or to help your fellow veterans in need of mortgage assistance.
Closing Note
Semper Fi to all my fellow Marines out there. My name is Kevin Reich, owner of First Meridian Mortgage, and I’m here to serve your mortgage needs.
---
00:00 Introduction to Kevin Reich and First Meridian Mortgage
00:04 Understanding the VA EARL Loan
00:32 Benefits of the VA Loan for Veterans
01:25 Key Details and Protections of the VA EARL
02:00 Eligibility Criteria for VA EARL
03:56 Rolling in Closing Costs and Prepaids
06:15 Proper Way to Execute a VA Streamline Refinance
07:19 Detailed Cost Breakdown and Scenarios
09:07 Interest Rates, Points, and Credits
14:36 Mathematics of Refinancing and Savings
21:58 Final Advice and Closing Remarks