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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

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VA LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. Do You Qualify for These 6 Benefits of a VA Streamline Refinance?

MORTGAGE

Do You Qualify for These 6 Benefits of a VA Streamline Refinance?

What you'll learn: Learn about the perks of a VA streamline refinance.

EXPECTED READ TIME: 6 MINUTES

Updated April 7, 2023

Do You Qualify for These 6 Benefits of a VA Streamline Refinance?

 
Have interest rates fallen since you got your VA loan? Or, do you want to switch from an adjustable interest rate to a fixed rate? Refinancing a mortgage can feel like a big, complicated process –  not so with a VA streamline refinance also known as an interest rate reduction refinance loan (IRRRL). Read on to see just what it entails – and find out if you could be eligible.

1.   VA IRRRLs are faster and more convenient than conventional refis

The VA streamline IRRRL program is a simple way to refinance your current VA loan for a new one to lower your rate, change terms, or switch from an Adjustable Rate Mortgage to a fixed rate. Lenders can use information gathered during your original VA loan application to approve the refi, making the process faster and easier than other mortgages.

Common reasons to apply for an IRRRL are to reduce your current loan term from 30 years to 15 years or to trade an adjustable rate for a fixed rate. And the core motivation for the VA IRRRL is the one that inspired its name: to reduce your interest rate. 

A word of caution before we go further. The streamline does not offer the option to access your home equity. If you’re interested in tapping into equity, consider a VA cash-out refinance instead.

2. A VA streamlined refi can save you money

There are many compelling benefits of a VA IRRRL. The name “streamline” comes from the loan’s reputation for not only easier qualification requirements and faster processing times, but also lower costs than conventional refinances. Since many of the costs of a typical refinance are eliminated and an appraisal is not usually necessary, you’ll save hundreds of dollars compared with a conventional refinance.

VA IRRRLs have closing costs to cover lender and third-party fees, but these are typically lower than they are for other loans. You’ll also pay less for the VA funding fee, which is 0.5 percent of the loan instead of 1.25 percent to 2.15 percent for most first-time purchase loans. (More on that later.) If reducing upfront expenses is important, you may be able to roll your closing costs and funding fee into the loan.

3. Occupancy requirements are less strict

VA purchase loans and cash-outs require the property to be your primary residence. With a streamline, you just need to show that the home was a primary residence in the past. That opens up the opportunity to use an IRRRL for second homes and investment properties.

4. Lower interest rates for VA IRRRLs

VA loans are known for offering lower interest rates compared to other mortgage types. And because the IRRRL is considered a rate-and-term refinance that doesn’t offer cash back at closing, the loan is less risky for lenders. That means you’ll often get the best rates available.

5. Reduced funding fees

Unless you received an exemption, you paid a VA funding fee for your purchase loan that helps offset costs of this government-backed program for U.S. taxpayers. Streamline refinances also require a VA funding fee, but it is lower than what you paid originally.

All VA streamlines have a funding fee of just 0.5 percent. Here are some examples of what that would look like with different loan amounts.

Loan Amount

VA IRRRL Funding Fee

$150,000

$750

$250,000

$1,250

$350,000

$1,750

6. Lower closing costs

With fewer verifications, most VA streamline loans close faster than typical purchase loans do. Since you don't have to wait for an appraisal or provide proof of your income or assets, underwriters can swiftly underwrite your loan and get you to the closing table faster. Ask your lender how long it will take your loan to close.

Not only do VA IRRRL mortgages have lower closing costs than most loans, but you can also roll them into your loan if you don't have the funds. This lowers the cash you'll need to close and may even speed up the closing process. Just remember you will end up paying more in interest.

Who can get a VA streamline refinance?

You can qualify for a VA IRRRL if you meet the following requirements.

You already have a VA loan

The VA IRRRL program is for current VA loan holders only. That’s how lenders can reference your past certificate of eligibility (COE), credit report, income records, and appraisal to streamline the approval process.

If you don’t already have a VA loan but want to take advantage of its many benefits, you may be able to refinance with a VA cash-out instead.

Your mortgage is current and seasoned

The biggest indication of whether you can afford the new loan payments is if you’ve consistently paid your current mortgage. Your lender will look at your payment history and the time that has elapsed since your original mortgage (also called seasoning).

A VA streamline requires that you…

  • Wait 210 days from the closing of your original mortgage
  • Make six consecutive monthly payments on your current loan before applying for the VA streamline
  • Wait 210 days from your first mortgage payment and the closing of the streamline

The refinance is beneficial

A lender must see there is a “net tangible benefit” to approve your IRRRL. That means you’re not just applying for the sake of changing things up – and a lower interest rate alone, for example, doesn’t guarantee you’ll save money over the life of the new loan compared with your current one. Typically, a net tangible benefit is determined when a loan either saves you money or gets you out of a riskier loan.

Bottom line: Is a VA IRRRL worth it?

As with any refinance, it’s important to weigh the VA IRRRL program pros and cons through the lens of your situation. An important question to ask yourself is if you plan to stay in your home long enough to make the cost of the refinance worth it. Your loan estimate will outline these costs so you know the details ahead of time and can make an informed decision.

Because costs are lower and you’ve established there is a net tangible benefit, a VA streamline refinance is usually worth it as long as you keep your property for at least a few years.

Best VA IRRRL lenders

The best VA-approved lender will offer more than great rates. Look for someone with vast experience and a passion for serving military families.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

What is a Streamline Rate Reduction

Discover what is a streamline rate reduction and if it's the best option for you. When you don't need cash-out, and need a lower rate, consider this refinance.
Person on calculator

FHA Streamline Refinances

All about FHA streamline refinances from guidelines, credit requirements, closing costs, zero-cost loans, and more.
person on calculator

Different Types of Mortgage Refinances

Discover the best refinance options including refinancing from FHA to conventional, VA streamline refi's, refinancing home equity, 1st & 2nd into one loan.
People discussing about papers

Benefits of Refinancing with a VA Streamline Refinance

VA home loans have many benefits, but a streamline home loan (IRRRL) offers even more reasons why a VA mortgage may be your best option. Find out more.
Plants on coins
image

VA LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of December 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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