The VA IRRRL program is the VA’s version of the streamline refinance. The requirements to qualify are very simple, enabling veterans with a current VA loan to refinance in a short amount of time. The concept behind the program is for veterans to save money, increasing their residual income by refinancing into a lower rate. There is an exception to the rule, though; you can get cash out with this program with one simple requirement.
Energy Efficient Changes
The VA allows you to take out up to $6,000 when you use the VA IRRRL. The catch, however, is that the $6,000 must be used for energy efficient changes in your home. The other catch is that you must have already made the changes within the last 3 months before the date of your closing. The changes you can make to your home that would qualify include:
- The addition or replacement of current windows or doors to make them more energy efficient
- Solar panels for heating or cooling
- Programmable thermostats
In order to qualify, the lender may require that you have an audit to determine the benefit that making energy efficient changes would have to your home. Obviously, any energy efficiency is good, but it has to be worth the cost in order for the lender and the VA to allow the costs to be included in the loan. The audit can also help you learn which energy efficient changes will have the greatest impact on your home. Because you are taking the equity out of your home, it makes sense to determine if it is worth it. For example, if you will not save but a few pennies on your utility bills, it might not make sense to waste the equity of your home on the changes because it will take you many years to recoup the costs. In some cases, however, the amount you can save can be tremendous, making the change well worth it.
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Understand the Consequences
It is important to understand that when you refinance your VA loan and take money out to make energy efficient changes, you will likely borrow more than the value of your home unless you put a down payment down when you originally purchase the home. Because VA loans do not require a down payment, though, many people do not bother, which means that you could be borrowing more than 100% of the value of the home when you use the IRRRL program along with the $6,000 in energy efficient changes. If the changes in your home will save you significant money, you can recoup the cost of refinancing in a short amount of time or if you know you will stay in the home for many years to come, you can recoup the costs over time, making the changes beneficial. As long as you know the difference in what to expect, you can ensure a positive outcome for your mortgage.
The VA IRRRL program is one of the easiest programs to qualify for because the VA does not require the lender to go through large amounts of verification to determine that you qualify. If you want to have a lower interest rate while being able to make changes to your home that increase its energy efficiency, this program is easy to use. You can refinance with any lender that is VA approved and take advantage of this beneficial program. Remember to shop around in order to get the best interest rate and costs so that you can save the most amount of money on your VA refinance.