The VA loan program offers the option of a VA Streamline refinance, also known as an Interest Rate Reduction Refinance Loan (IRRRL).
Streamlines are only available to current VA loan borrowers who want to lower their monthly payment by getting a new interest rate (or who have an adjustable-rate mortgage and want to get into a fixed-rate mortgage, which may actually lead to an increased interest rate). It’s a low-hassle refinance option with minimal paperwork and little to no costs.
VA homeowners are only on the hook to prove previous occupancy of a property. Yes, it’s possible to use a VA Streamline to refinance a residence at a previous duty station that is now being rented out. Lenders may want to see that qualified Streamline candidates have been current on their loan during the last six months and not have more than one 30-day late payment in the last year. Talk with a lender about their specific requirements.
With a VA Streamline refinance loan, there’s no need for the borrower to furnish another Certificate of Eligibility. You may be able to obtain a VA Streamline without the need for a credit check or a VA appraisal. Requirements may vary depending on the lender you talk to. Borrowers can finance the 0.5 percent VA funding fee and closing costs into the loan balance on a Streamline. Homeowners who receive service-connected disability compensation are usually exempt from the funding fee.
That means in some cases there may be little to no out-of-pocket costs for a Streamline. Unlike the VA Loan Cash-Out refinance, borrowers cannot take out cash against their home equity through IRRRLs.
Making use of the VA loan program is good, but having the best possible interest rate on that loan is great. VA Streamlines give military homeowners the chance to adjust their interest rate structure to save money in the long run.
Before you seek a VA Streamline, consider what type of interest rate you want going forward: fixed or adjustable. Fixed-rate Streamlines require the new monthly payment to be lower than the previous VA loan. However, refinancing to an adjustable rate mortgage (ARM) makes a new higher monthly payment permissible.
Call it what you will, IRRRL or VA Streamline, because it’s one and the same: a great option for VA loan borrowers to lower their mortgage obligation.
Keep in mind, refinancing may result in higher finance charges over the life of the loan.