Interest Rate Reduction Refinance Loan (IRRRL)

AAA

DEFINITION of 'Interest Rate Reduction Refinance Loan (IRRRL)'

A mortgage refinancing program offered by the U.S. Department of Veterans Affairs (VA) to homeowners with VA loans. The VA Interest Rate Reduction Refinance Loan (IRRRL) is a VA-loan-to-VA-loan process, designed to allow homeowners to refinance a fixed loan at a lower interest rate or to convert an adjustable rate mortgage (ARM) into a fixed rate mortgage.

INVESTOPEDIA EXPLAINS 'Interest Rate Reduction Refinance Loan (IRRRL)'

Because only VA loans can be refinanced through the IRRRL program, the proceeds from the refinance cannot be used to pay for any non-VA mortgage. Borrowers can forgo up-front fees by rolling the processing costs into the loan amount or by accepting a higher interest rate. The property the mortgage covers does not have to be appraised in order to apply. 

If the homeowner has a second mortgage that is not a VA loan, the VA loan being refinanced must be the first mortgage. This requires the homeowner to subordinate the lien. While there is no cap on the amount a homeowner can borrow, lenders will consider the liability limits that the VA is able to assume when determining the final amount they are willing to lend. Veterans are typically entitled up to $36,000.

RELATED TERMS
  1. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  2. Total Annual Loan Cost (TALC)

    The projected total cost that a reverse mortgage holder should ...
  3. Forbearance

    A temporary postponement of mortgage payments.
  4. Mortgage Modification

    A permanent change in a homeowner's home loan terms that makes ...
  5. USDA Non-Streamlined Refinancing

    A mortgage-refinancing option offered by the United States Department ...
  6. No-Appraisal Mortgage

    A type of home loan used for refinancing for which the lender ...
RELATED FAQS
  1. How do I know if I should refinance my mortgage?

    The typical rule of thumb is that if you can reduce your current interest rate by 0.75-1% or higher then it might make sense ... Read Full Answer >>
  2. When would a corporation want to refinance its debt?

    Favorable market conditions or the strengthening of a company's credit rating may lead to the refinancing of corporate debt. ... Read Full Answer >>
  3. Can small investors buy collateralized mortgage obligations (CMOs)?

    Collateralized mortgage obligations (CMOs), which are pools of mortgage-backed securities (MBS), are available to smaller ... Read Full Answer >>
  4. What is the difference between an option-adjusted spread and a Z-spread in reference ...

    Unlike the Z-spread calculation, the option-adjusted spread takes into account how the embedded option in a bond can change ... Read Full Answer >>
  5. What are some historical examples of debt securitization?

    The first debt securities were probably sovereign debt assets that were transferred from the British government to mercantilist ... Read Full Answer >>
  6. What price-to-book ratio is considered average in the chemicals sector?

    You can use Microsoft Excel to calculate the loan-to-value ratio if you have the mortgage amount and appraised value of a ... Read Full Answer >>
Related Articles
  1. Home & Auto

    The Home Appraisal: Your Key to a Successful Refinance

    When you refinance your mortgage, everything hinges on the appraisal. Here's what appraisers look at, how to make your home look as valuable as possible and ways to fight back if the valuation ...
  2. Home & Auto

    Should You Cash Out When You Refinance?

    If you want to cash out, make sure you’re doing it for the right reasons.
  3. Home & Auto

    4 Reasons Not To Refinance Your Home

    Interest rates are still extremely low, but they aren't expected to stay there for long. Should you refinance before it's too late? Not necessarily.
  4. Home & Auto

    6 Questions To Ask Before You Refinance

    Refinancing your mortgage can be a quick way to save on payments, but it's not for everyone.
  5. Home & Auto

    When (And When Not) To Refinance Your Mortgage

    There are both good and bad reasons to refinance. Learn more about both here.
  6. Credit & Loans

    7 Bad Reasons To Refinance Your Mortgage

    When low mortgage rates are everywhere, it might seem like a good time to refinance. Make sure you are doing it for the right reasons.
  7. Credit & Loans

    9 Things To Know Before You Refinance Your Mortgage

    Whether or not a mortgage refinance is right for you depends more on individual circumstances than this week's mortgage interest rates.
  8. Credit & Loans

    All-Time Low Mortgage Rates: Time To Refinance?

    Interest rates keep dipping lower and lower. Find out what it takes to tip the scales toward a refinance.
  9. Options & Futures

    Should You Refinance Your Mortgage When Interest Rates Drop?

    Refinancing is a great way for many homeowners to improve their financial situation - but beware of the downsides.
  10. Home & Auto

    What Are The Tax Advantages Of Buying A Home?

    Don't forget these deductions and credits that homeowners can use to reduce their tax bill.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center