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.

BREAKING DOWN '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. VA Loan

    A mortgage loan program established by the United States Department ...
  2. No-Appraisal Loan

    A mortgage that does not require an appraisal of the property’s ...
  3. No-Appraisal Mortgage

    A type of home loan used for refinancing for which the lender ...
  4. No-Appraisal Refinancing

    A type of mortgage for which the lender does not require an independent, ...
  5. Hope For Homeowners

    A federal aid program aimed at helping homeowners who reside ...
  6. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against ...
Related Articles
  1. Personal Finance

    When (And When Not) to Refinance Your Mortgage

    There are both good and bad reasons to refinance. Learn more about both here.
  2. Investing

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  3. Personal Finance

    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.
  4. Personal Finance

    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.
  5. Personal Finance

    7 Mortgage Trends To Expect In 2011

    How will the year compare to 2010? What's likely to be different?
  6. Personal Finance

    Mortgage Fees That Can Trash Your Refinance Deal

    Before deciding that refinancing your mortgage at a lower interest rate is a good deal, factor all the fees into your calculations.
  7. Personal Finance

    Reduce Interest With An All-In-One Mortgage

    "Offset" mortgages combine a checking account, home-equity loan and mortgage into one account.
  8. Personal Finance

    Should You Cash Out When You Refinance?

    If you want to cash out, make sure you’re doing it for the right reasons.
  9. Investing

    Financial Institutions: Stretched Too Thin?

    Find out how to evaluate a firm's loan portfolio to determine its financial health.
RELATED FAQS
  1. Which is better: dollar cost averaging or value averaging?

    Compare the two investment strategies of dollar cost averaging and value averaging, and learn which one usually generates ... Read Answer >>
  2. What are the benefits of an assumable mortgage?

    An assumable mortgage allows the purchaser of a property to assume the mortgage from the property's seller. The benefits ... Read Answer >>
Trading Center