VA IRRRL (Streamline Refinance): How It Works
Who can use it, what it costs and how to check whether it will save you money.
An Interest Rate Reduction Refinance Loan, or IRRRL, is a VA refinance for veterans who already have a VA-backed home loan. The VA describes it as a way to lower your monthly payment with a lower interest rate, or to make your monthly payments more stable. It is often called a streamline refinance.
Who can get an IRRRL
The VA says you must meet all of these:
- You have an existing VA-backed home loan.
- You use the IRRRL to refinance that same VA loan.
- You certify that you currently live in the home or previously lived in it.
If you have a second mortgage, the holder of that loan must agree to subordinate it, meaning it stays behind your new loan.
What it costs
The VA funding fee for an IRRRL is 0.50% of the loan amount, lower than the fee on a purchase or a cash-out refinance. On a $280,000 loan that is $1,400. Other costs, such as lender charges, vary by lender, so ask for a Loan Estimate. You can check the fee for your own loan in the VA funding fee calculator.
Does it save money? A worked example
This example is for illustration only. Say your balance is $280,000 on a 30-year loan at 7.00%, and you refinance to 6.25% with the 0.50% fee financed (a new loan of $281,400).
| Before | After | |
|---|---|---|
| Interest rate | 7.00% | 6.25% |
| Loan amount | $280,000 | $281,400 |
| Monthly principal and interest | $1,863 | $1,733 |
| Monthly savings | $130 |
If your total refinance costs were $3,000, that saving would repay them in about 23 months. Refinancing also resets the loan term, so compare the total interest over time, not just the monthly payment. The VA IRRRL calculator runs your own numbers, including the VA's 36-month recoupment test.
What an IRRRL is not
An IRRRL is not a cash-out refinance. The VA lists the cash-out refinance as a separate loan type. If you want to turn home equity into cash, ask your lender about that option, and note that its funding fee is higher (2.15% on first use, 3.30% after).
The VA's tests a refinance must pass
Since 2018, federal law has added safeguards so that a VA refinance actually benefits the veteran. In summary:
- Seasoning. The loan being refinanced must be at least 210 days past its first payment due date, and you must have made at least six monthly payments.
- Recoupment. The fees and closing costs of the IRRRL must be recovered through lower payments within 36 months.
- Rate reduction. When refinancing a fixed rate into a new fixed rate, the new rate must generally be at least 0.50 percentage points lower. Moving from a fixed rate to an adjustable rate requires a larger drop.
Your lender runs these tests, but it is worth checking them yourself so you are not surprised.
Break-even at different closing costs
Using the monthly saving of $130 from the example above, here is how long it takes to recover different amounts of refinance costs, and whether that fits the VA's 36-month recoupment test.
| Total IRRRL costs | Months to recover | Within 36 months? |
|---|---|---|
| $2,000 | 15 months | Yes |
| $4,000 | 31 months | Yes |
| $6,000 | 46 months | No |
Questions to ask your lender
- What is the total cost of the refinance, and how many months until I break even?
- What documents do you need? Each lender sets its own requirements.
- Can the funding fee and costs be rolled in without raising my monthly payment?
Frequently asked questions
What does IRRRL stand for?
Interest Rate Reduction Refinance Loan. It is often called a VA streamline refinance.
Can I get an IRRRL if I do not live in the home anymore?
The VA says you must certify that you currently live in the home or previously lived in it.
How much is the funding fee on an IRRRL?
The published rate is 0.50% of the loan amount, and you can pay it upfront or finance it. Exempt borrowers pay nothing.
Is an IRRRL the same as a cash-out refinance?
No. The VA lists them as separate loan types, and the cash-out refinance has a higher funding fee.
Will an IRRRL always lower my payment?
Not always. It depends on your new rate, your loan term and the costs. Compare the monthly savings against the total cost before you decide.
Sources
This page is educational and is not legal, tax or financial advice. Rules and rates can change, so confirm the details with the VA and your lender.