Interest Rate Reduction Refinance Loan (IRRRL)


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.

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  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. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  4. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  5. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  6. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>

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