Interest Rate Reduction Refinancing Loans (IRRRL)

(Lender’s Handbook, Chapter 6, Topic 1)

A veteran who obtained a VA loan may refinance it with a VA guaranteed loan at a lesser interest rate without using additional entitlement.

Note: IRRRLs can only be used to refinance existing VA guaranteed loans.

• The new loan must be at a lesser interest rate than the old VA loan except when refinancing an existing adjustable rate mortgage with a new fixed rate mortgage.
• The dollar amount of guaranty applicable to the prior VA loan is transferred to the new loan.
• The minimum guaranty on an IRRRL is 25%.
• If the existing loan is delinquent, the IRRRL must be submitted to VA for prior approval.
• Although no underwriting is required, approval of new credit may be required by the trustee in a Chapter 13 bankruptcy.
• No appraisal is required.
• The veteran may not obtain cash proceeds.
• No portion of the loan proceeds may be used to pay off other debts.
• The new loan is limited to the balance of the old loan, the funding fee, up to $6,000 of energy efficient improvements, and allowable closing costs including not more than 2 discount points.
• The term of an IRRRL may not exceed the original term of the loan being refinanced by more than 10 years.
• The veteran, including active-duty service members stationed elsewhere, is able to satisfy the occupancy requirement by certifying prior occupancy.
• If the veteran whose entitlement was previously used has died, and the surviving spouse was a co-obligor, that spouse is considered a veteran for the purpose of the IRRRL.

Note: Lenders may now use the WebLGY program in the VA Portal site: https://vip.vba.va.gov to verify current VA loans in lieu of a Certificate of Eligibility for IRRRLs.

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