VA Refinancing Loans: A Reader Question
A reader asks, “I was and still am an unmarried vet. Can I now refinance just to see if I can get a lower rate/mortgage payment?”
The short answer is yes. A borrower’s marital status has nothing to do with whether he or she is qualified to apply for VA refinancing. We mention this only because the marital status was mentioned so prominently in the reader question. Borrowers should know that Fair Housing Act laws forbid any discrimination against a borrower on the basis of family status or lack thereof.
The type of refinance loan to consider in this case, where a borrower wants a lower interest rate and/or monthly mortgage payment is the VA Interest Rate Reduction Refinancing Loan (VA IRRRL) , if the existing loan is a VA guaranteed mortgage. (Refinancing non-VA loans must be done through the VA cash-out refinance loan program.)
VA IRRRLs are described in the VA Lender’s Handbook as follows:
“An IRRRL is a VA-guaranteed loan made to refinance an existing VA-guaranteed loan, generally at a lower interest rate than the existing VA loan, and with lower principal and interest payments than the existing VA loan. Generally, no appraisal, credit information or underwriting is required on an IRRRL, and any lender may close an IRRRL automatically.” Furthermore, “The principal and interest payment on an IRRRL must be less than the principal and interest payment on the loan being refinanced unless one of the following exceptions applies:
- the IRRRL is refinancing an Adjustable Rate Mortgage,
- term of the IRRRL is shorter than the term of the loan being refinanced, or
- energy efficiency improvements are included in the IRRRL.
A significant increase in the veteran’s monthly payment may occur with any of these three exceptions, especially if combined with one or more of the following:
- financing of closing costs,
- financing of up to two discount points,
- financing of the funding fee, and/or higher interest rate when an ARM is being refinanced.”
VA IRRRL loans also feature an option to allow extra funds for energy-efficient improvements to the home. These improvements must be VA-approved and there are special requirements for adding them–speak to a lender about the VA Energy Efficient Mortgage option if you are interested in knowing more.
Do you have questions about VA refinance loans? Ask us in the comments section.