VA Refinancing to Lower Monthly Payments

If you need a refinance loan that specifically helps lower your monthly mortgage payment and/or mortgage interest rate, the VA IRRRL might be the best option for you.

Because this type of VA loan is designed specifically for cutting a homeowner’s monthly payments, lowering the mortgage loan interest rate, or both at the same time, the VA IRRRL program does not feature a VA-required appraisal.

These loans are unique when compared to home equity loans, reverse mortgages, and conventional cash-out refinance loans. Because of the nature of the VA IRRRL program there are some stipulations put in place that VA loan applicants should keep in mind when they are considering their options for a home loan refinance.

According to the VA Lender’s Handbook, “Generally, the party(ies) obligated on the original loan must be the same on the new loan (and the veteran must still own the property).” 

What is the procedure when there is a possible change in “obligors” on the VA home loan? The VA Lender’s Handbook instructs the lender:

“The lender should contact VA regarding a proposed IRRRL involving a change in obligors unless the acceptability of the IRRRL is clear.  Sample cases are provided in the table in this subsection.”

Scenarios include when a military member and spouse divorce, the non-military spouse is keeping the home and wants to refinance the VA home loan. 

According to VA loan rules, “The spouse cannot get an IRRRL unless the veteran agrees to be obligated on the new loan and commit his or her entitlement to the new loan.  A person without entitlement cannot get an IRRRL or any other type of VA loan.”

VA loan rules in such cases are different for surviving spouses of military members who have died--surviving spouses should contact the Department of Veterans Affairs for assistance in these circumstances to learn what their rights and obligations may be. 

In general, when the veteran and spouse were obligated on the original VA loan, the surviving spouse can apply for a VA IRRRL. A divorced veteran and a new spouse can be obligated on the new IRRRL, as can a veteran who took out a joint VA loan with non-veterans and wants to refinance the property on his or her own. Talk to a participating VA lender for more information on VA IRRRLs and what your options might be to get one.

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