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. No-Appraisal Loan

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

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

    A type of mortgage for which the lender does not require an independent, ...
  4. Variable Rate Mortgage

    A type of home loan in which the interest rate is not fixed. ...
  5. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  6. Refinance Wave

    A situation where a large amount of mortgage refinancing occurs ...
Related Articles
  1. Personal Finance

    How to Refinance a VA Loan: A Step-by-Step Guide

    How do you refinance a VA loan? In some cases it’s much easier than with a conventional loan. We explain.
  2. Personal Finance

    The Unique Advantages Of VA Mortgages

    Find out how being a veteran can save you money on your mortgage.
  3. Personal Finance

    How to Buy a House With a VA Loan

    Discover the process, requirements and eligibility for securing financing for a home purchase with a Veteran's Administration (VA) mortgage.
  4. Personal Finance

    The Pros and Cons of VA Loan Down Payments

    Are making VA loan down payments when buying a home a good idea? Why put money down when you don’t have to? Let’s take a look at the pros and cons.
  5. Personal Finance

    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.
  6. Investing

    Financing Basics For First-time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  7. Investing

    When Does It Pay to Refinance Your Mortgage?

    Mortgage interest is among a homeowner’s biggest expenses, so refinancing is a popular way to lower costs, but it doesn’t always make sense.
  8. Personal Finance

    When (And When Not) to Refinance Your Mortgage

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

    Should You Refinance Your Home if You're Over 50?

    Whether you should refinance your mortgage or not depends on your savings but for people over the age of 50 there are other specific factors to consider.
  10. 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.
RELATED FAQS
  1. What are the best ways to pay off my mortgage quickly?

    Learn how mortgage payments may be reduced and how to save thousands on mortgage loans by lowering the interest and principle ... Read Answer >>
  2. Is it a good idea to add a reverse mortgage to your retirement strategy?

    A reverse mortgage can be a great way to increase retirement income. Does it work for everyone? What happens after a homeowner ... Read Answer >>
  3. 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