Compare Rates on a VA Interest Rate Reduction Refinance Loan (IRRRL)
If you currently have a VA loan but you think refinancing could lower your monthly payment or make it easier to budget, look into an Interest Rate Reduction Refinance Loan (IRRRL). This streamlined refinance backed by the Department of Veterans Affairs offers some major advantages. That said, it has limitations, too.
To find out if a VA IRRRL is a good fit for your situation, compare mortgage rates and figure out if this kind of refi would fit your needs.
What is a VA IRRRL?
First, a VA IRRRL doesn’t change the terms of your existing VA loan. Like any kind of refinance, it replaces your current loan with a completely new one.
This kind of refinance is backed by the VA to help homeowners who currently have a VA loan. To get your loan refinanced, you’ll need to work with a lender who offers VA loans (just like you did to get your current VA loan).
The big upside of a VA IRRRL loan is that it comes with a streamlined application process. With this streamlined refi, for example, the VA doesn’t require you to get your home appraised to confirm its value or to verify your income. (That said, the lender can still ask for those things).
A VA IRRRL refinance is a good option if interest rates have dropped since you got your loan, or you currently have an adjustable-rate mortgage (ARM) but you want the predictable monthly payments that come with a fixed-rate loan.
Pros and cons of a VA IRRRL
This option’s definitely worth exploring if you currently have a VA loan, but you should know the advantages and drawbacks.
Pros of a VA IRRRL
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The streamlined process of this kind of VA refinance minimizes the paperwork required to finalize your new loan, which should make the process faster and easier for you.
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The new loan can come with a lower and/or fixed interest rate, making your monthly mortgage payment more manageable.
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You can roll the VA funding fee and closing costs into the loan, which makes your out-of-pocket costs for this kind of refi low or possibly nonexistent.
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You won’t need a new VA loan entitlement with an IRRRL. It uses your current entitlement, which means it doesn't affect your availability in the future.
Cons of a VA IRRRL
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Not all lenders offer VA loans, let alone specialized kinds of refinances like an IRRRL. You’ll have fewer lender options if you decide to go this route than if you chose to refinance into a conventional loan.
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You can't take any cash out with a VA IRRRL. If you were hoping to turn some of the equity you’ve built up in your house into cash in your pocket, you’ll need to look at another option like a VA cash-out refinance.
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If you roll the funding fee and/or closing costs into your loan, it increases your monthly payment. That could eat into the potential savings you’ll see with the refi.
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If your VA IRRRL extends your loan term, it could mean paying more in interest over time than sticking with your current loan.
How to compare VA Refinance Rates mortgage rates
If you only take one piece of advice when you’re getting a mortgage, let it be this: compare rates from at least three different lenders. Doing so can save you thousands of dollars over the life of your loan.
To make it easier for you to put the work in here, follow these steps:
Step 1: Understand your borrower profile
First, you want to get a handle on how mortgage lenders are going to see you. If you look like you’re going to be able to repay your home loan fairly easily, they’ll offer you more favorable conditions. If you look high-risk, you’re going to pay more for your mortgage. Specifically, you’ll be charged a higher interest rate.
So, what makes a borrower low- or high-risk? To decide what kind of loan to offer to you (if any), lenders look at a lot of factors. The biggest ones here include:
- Your monthly income — you don’t want an overly large chunk to have to go toward paying your monthly mortgage bill, which lenders measure with your debt-to-income (DTI) ratio
- Your credit score, which essentially tells them how good you’ve been with managing money in the past
- Your loan-to-value (LTV) ratio (higher is riskier) — the price of the house and your down payment size both come into play here
If you’re not in good shape in any of these areas, putting in some work before you buy (e.g., working on your credit score, lowering your DTI ratio) can help you get a lower interest rate.
Step 2: Use rate tables to see what’s on offer today
There are lots of resources online that show you rate offers from leading lenders. Use a mortgage rate table to get a feel for what kind of interest rates are available from financial institutions that provide home loans in your area.
Ideally, that rate table lets you input personal information, like your credit score and the price of the house you want to buy. This way, the rates you get shown should align with what you’re actually eligible to get. A lot of lenders advertise low starting rates, but only the “best” borrowers will be approved for them once they apply.
Step 3: Get preapproved with three lenders
Once you’ve picked out a few lenders that look good to you, go through their preapproval process. That will mean filling out some paperwork, but it’s the best way to figure out what you can really qualify for in terms of loan size and interest rate.
Have financial documents — like your bank statement and pay stubs — handy to make it easier to complete your preapproval applications.
Step 4: Compare preapprovals
When you get preapproved, the lender should give you documentation about your potential mortgage. Ideally, this gives you a feel for the total amount you’re borrowing, the repayment term, the interest rate, fees, and closing costs.
Line up your quotes from each lender and go through them, paying special attention to the annual percentage rate (APR). This tells you how much you’ll pay each year for the loan including not just interest, but also fees. By looking at APRs, you get a clear idea of what you’ll truly pay if you choose that specific mortgage. This helps you identify the best option for yourself and your financial goals.
If you’re ready to start comparing VA Refinance Rates rates, use our rate table to get started. We have fields up top where you can input key details like your credit score range and zip code so we can best tailor the mortgage rate offers to you.