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If you’re in the military or a veteran, you may have heard of a VA IRRRL loan. But what is it? Why is an IRRRL loan such a good deal for veterans? And how do you get started? We’ll cover all of those here.
What is a VA IRRRL Loan?
IRRRL stands for Interest Rate Reduction Refinance Loan. The government isn’t very creative with their names or acronyms – the loan is just as the name describes.
An IRRRL loan is a type of VA loan for homeowners who are refinancing. Given the low interest rates in our current environment, a ton of veterans are taking out IRRRLs right now to take advantage of these rock-bottom interest rates.
So why does it exist? Well, VA Loans were created to give veterans a great opportunity to buy a home. While there is a VA Funding Fee, no down payment is required and you’ll never have to pay private mortgage insurance on a VA loan.
A VA IRRRL loan was also created to give veterans a great option, but for refinancing. A VA loan can be used to buy a home, but an IRRRL is only for refinancing.
Why is an IRRRL Great for Veterans?
It’s common for veteran homeowners to take advantage of an IRRRL for one main reason: it’s a good deal. Just like the name implies, the loan is typically a good way to reduce the interest rate you’re paying on your home mortgage.
For example, let’s say your mortgage was $300,000 over 30 years at a 3.92% interest rate. Your monthly mortgage would be $1,418 (not counting things like insurance, property taxes, etc.)
But let’s say you took out an IRRRL and got your interest rate down to 3.32%. That drops your monthly payment down by $100 to $1,317.
That may not sound like much, but remember this is over the course of the entire loan. You’re saving $100 x 12 months x 30 years = $36,000 saved! That’s not chump change.
An IRRRL is also good if you currently have an adjustable rate mortgage and want a payment that won’t fluctuate. It lets you lock in a fixed rate.
How Do You Qualify for an IRRRL?
Before you start down the path of an IRRRL, we recommend you think about the fact that refinancing requires some upfront costs. Those costs can be financed as part of the IRRRL, but they’re still there.
If you plan on moving in the near future, it may not make sense to refinance. For example, let’s say it cost you $2,000 to refinance and you’ll save $100 a month. That means it’d take you 20 months before you actually start saving money.
Do you plan on moving in the next 20 months? If so, keep your current mortgage instead of refinancing.
If you don’t plan on moving and will stay in your home for a while, an IRRRL may be a great option for you. Give us a call at (844) 824-5626 and we’ll help you get started.