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Refinancing a VA Loan in California With the IRRRL Program

With mortgage rates hovering near a historic low, now could be a great time to refinance a VA loan in California. And thanks to the VA’s Interest Rate Reduction Refinance Loan (IRRRL) program, the process is straightforward and easy to navigate.

But what is an IRRRL? How does this program work? And how might it benefit you, as a homeowner? Here’s what you need to know about refinancing a VA loan in California, through the rate reduction option.

Meet the IRRRL (or “Earl”) of Mortgage Refinance

Do you have an existing VA home loan on the house you’re in right now? Do you want to reduce your monthly payment by taking on a lower mortgage rate? If so, the Department of Veterans Affairs has a unique program that might be right for you.

It’s called the Interest Rate Reduction Refinance loan, or IRRRL (often pronounced as “Earl”). The IRRRL program is also referred to as “VA streamline refinancing” because there’s usually less paperwork to deal with. You can think of it as a quicker refinance loan option with fewer hassles, headaches and requirements.

Refinancing your current California VA loan with an IRRRL offers several advantages. As its name suggests, it could help you reduce your mortgage rate and lower your monthly payments. Depending on the rate you have right now, that could be a big money-saver over time.

California homeowners can also use this VA mortgage refinancing strategy to switch from an adjustable-rate (ARM) loan to a more secure fixed mortgage. In some cases, homeowners are able to accomplish both of these goals simultaneously — reducing their interest rates while also converting from an ARM to a fixed mortgage.

California VA loan Refinancing, Simplified

This program is similar to a traditional refinance loan in California, in the sense that you are replacing your current VA loan with a new one. But the process is usually more streamlined and easier to navigate, compared to a regular (non-VA) refinance scenario.

The process itself is fairly straightforward. You would speak to a VA-approved California mortgage company (like us) to find out if mortgage refinancing will work to your advantage. After that, you would apply for the loan, pay the VA’s funding fee, and complete the closing process.

There’s another benefit to refinancing a VA loan in California with the IRRRL. In most cases, the closing costs associated with the transaction can either be paid at closing or “rolled” into the loan. As it states on the Department of Veterans Affairs website: “With an IRRRL, you can include these costs in the new loan so you don’t have to pay up front.”

Minimum Requirements for the Program

Requirements and criteria. Every mortgage loan program has them, and the VA IRRRL program is no exception.

To refinance a VA-guaranteed mortgage loan through the interest rate reduction (IRRRL) program, California homeowners must meet certain requirements.

You may be eligible for streamlined refinancing if all of these statements are true:

  • You already have a VA-backed home loan.
  • You’re using the IRRRL to refinance the existing loan mentioned above.
  • You can certify that you currently live in, or used to live in, the home you’re going to refinance.

These are the basic program requirements, as outlined on the Department of Veterans Affairs website. If you meet all of the criteria above, you could be eligible for the program. And it could save you a significant amount of money going forward.

Capitalizing on Today’s Low Mortgage Rates

According to the mortgage data firm Black Knight, millions of Americans could still benefit from refinancing their existing mortgage loans. That’s because interest rates are still hovering at historically low levels, as of October 2020.

Related: VA interest rate outlook for 2021

In fact, the average rate for a 30-year fixed mortgage recently sank to 2.88% according to Freddie Mac. That was the lowest average (to date) in the 50-year history of Freddie Mac’s weekly rate survey. So we’re talking about significant money-saving potential here.

Rates through Sept 24, 2020

If a picture is worth a thousand words, the chart above speaks volumes. It shows the average rate for a 30-year fixed mortgage loan, going back three years. This is based on the long-running Freddie Mac survey mentioned above.

As you can see, 30-year mortgage rates are much lower now than they were in 2018 and 2019. So there are still many homeowners in California who could refinance their VA loans and secure a lower interest rate.

Depending on the situation, refinancing could lead to significant savings over the long term. It’s worth looking into, at the very least!

Have questions? Bridgepoint Funding specializes in California VA loans, for both purchase and refinancing. Please contact us if you have questions about the IRRRL program, of if you’d like to see how a refinance might work out in your situation.

Mike Trejo

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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