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 Cash-Out Refinance

    The refinancing of an existing mortgage for an amount equal to ...
  5. No-Appraisal Refinancing

    A type of mortgage for which the lender does not require an independent, ...
  6. Refinance

    1. When a business or person revises a payment schedule for repaying ...
Related Articles
  1. 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.
  2. Personal Finance

    How to Get a No-Down-Payment Mortgage

    It's harder to find, but you can still buy a home without any money down.
  3. Personal Finance

    When (And When Not) to Refinance Your Mortgage

    There are both good and bad reasons to refinance. Learn more about both here.
  4. 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.
  5. Investing

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  6. 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.
  7. 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.
  8. Personal Finance

    7 Mortgage Trends To Expect In 2011

    How will the year compare to 2010? What's likely to be different?
  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 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 >>
  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