USAA offers the VA IRRRL as a refinance option. The VA IRRRL (or “interest rate reduction refinance loan”) is a type of Streamline Refinance that makes it easier for VA loan holders to switch to a lower rate and monthly payment.
A VA Streamline Refinance may not be worth it if you’ll pay more in closing costs than you’ll save. And it won’t help you cash out your home equity. If you want to refinance with cash back — to pay for home improvements, for example — you’ll need to use the VA cash-out refinance or another cash-out loan program.
The amount of the funding fee on a regular VA loan is anywhere between 1.4 – 3.6% of the loan amount depending on service status, down payment amount, if it’s your first time using a VA loan and whether it’s a purchase or refinance. For a VA Streamline, the funding fee is 0.5% of the loan amount in all circumstances.
IRRRLs have closing costs you may have to pay. However, the VA funding fee is significantly lower for refinancing compared to the fee when you buy a home. You currently have to pay just 0.5% of the loan amount with an IRRRL refinance. Many of these closing costs can be rolled into your loan amount too.
USAA also says New Day Financial, which does business as NewDay USA, has infringed on USAA’s slogan — “We know what it means to serve” — with “We understand what it means to serve.” USAA trademarked the slogan in 1999 and received a copyright registration for it in 2011.
But generally speaking, it is safe to say that you should be able to get a VA IRRRL loan done in less than 30 days from when you sign the loan application.
IRRRL: Go from ARM to fixed
If you want to move to a shorter term — say, from a 30-year to a 15-year mortgage — you can do that, too. You’ll save a lot of interest over the life of the loan, but your payment will be higher.
There is a waiting period for the VA IRRRL refinance. As of June 1, 2018, the closing date of a new VA streamline loan must be after both of the following events have occurred. At least 210 days (about seven months) have passed since the first payment on the current VA loan.
If you plan to get a VA loan as a cash-out refinance, the funding fee requirements are 2.3% for first-time borrowers and 3.6% for subsequent borrowers. For an Interest Rate Reduction Refinance Loan, also known as a VA Streamline refinance, the funding fee is 0.5% across the board.
The exact amount that you’ll pay in VA loan closing costs will vary based on the home you choose and the details of your loan. However, you should expect to find closing costs 3% – 5% of the total value of the loan.
Closing costs and funding fees are some of the disadvantages of the VA IRRRL. Borrowers are able to roll their closing costs into the new loan balance; however, this just means paying them later with interest. Still, some veterans may decide that paying more money over time is worth paying less per month.
