How Many Times Can I do a VA Streamline?
Theoretically there is no limit to how many times you are allowed to use an Interest Rate Reduction Refinance Loan (IRRRL) to refinance your mortgage. The VA has no set amount of years you have to wait between refinances, and places no limit on the number of IRRRLs you can do in total. While the VA sets no limit on how many IRRRLs you can theoretically do, the VA requirements for getting an IRRRL, lender requirements for approving an IRRRL, and your own limitations all provide practical restraints to the number of times you can realistically get an IRRRL done on your home. We’ll cover what those are in order to help you be as prepared as possible for the future.
First, the VA requires that the resulting interest rate from an IRRRL be lower than the rate on the original loan. This provides some major practical restraints because when current market interest rates are higher than the rate you have on your loan, getting an IRRRL is unlikely to yield a lower interest rate for you. Since getting a lower interest rate is a requirement of the IRRRL (unless you’re refinancing from an ARM to a fixed-rate mortgage), you may be limited in how many times you can do one by nothing more than market interest rates. An extension of the interest rate rule is that your monthly principal+interest payment must go down unless you have a shorter term on your new loan than the original. You will also be limited by the things that are and are not possible with an IRRRL. If you need to get cash out on your loan, you won’t be able to use an IRRRL to do so, or if the obligors have changed on the loan, you’ll need to use a normal refinance to get them changed.
Lenders may also impose limits on how often they are willing to let a borrower do an IRRRL, or refinance at all, for that matter. While most lenders don’t have specific policies in place to limit how often they will approve refinances, it’s going to raise some eyebrows if you are refinancing more than once every 3-5 years. Refinancing so often is usually not practical or beneficial to the borrower, so if a borrower is refinancing that often, it raises a lot of questions that the lender will want answers to before approving the refinance. In some cases, a lender may not approve the loan simply because of how little time it has been since the last refinance. In this way, in practice a borrower is limited to a new IRRRL every 3-5 years at the most. What is more common is for a borrower to purchase a home, use an IRRRL to refinance it once a few years later, then sell it a few years after that and move to a new home.
There are also practical restraints to doing an IRRRL very frequently that are important to consider, and have everything to do with you. Each time you do an IRRRL, you are costing yourself thousands of dollars in closing costs. While every dime of those costs can be rolled into the loan amount, that also means those costs will be accruing interest and you’ll end up paying more by the end than if you had paid all of it upfront. Even when you are able to secure a lower interest rate, it takes years for a lower interest rate to translate into enough savings to make up for how much money you are spending in closing costs. Talk with your lender for more details on this, and he or she should be able to make a graph or table that will show you your “break-even” point from the saved interest vs. closing costs.
As easy as an IRRRL is to get, it’s still a headache, and with so little practical benefit to refinancing frequently, even with an IRRRL, it doesn’t always make a lot of sense to do it. That being said, for most borrowers who just want to make sure that getting an IRRRL now won’t ruin their chances for getting an IRRRL sometime down the road, there’s nothing to worry about. You should be able to refinance your home with an IRRRL as many times as any reasonable human being would want to.