Updated January 2018
The VA IRRRL, or Interest Rate Reduction Refinancing Loan, is the VA’s way of helping veterans who already have a VA mortgage loan to refinance that loan to a lower rate. Although this loan does not have to cost the borrower any out-of-pocket fees, there are VA refinance closing costs associated with the loan, as there are with any loan. These closing costs can be rolled into the new loan amount, in which case the borrower must pay 15 to 30 years of interest on them, or they can be paid up front.
Here are some VA refinance closing costs normally associated with an IRRRL:
- Origination fee (see below for more information on this fee)
- Discount points
- Prepaid taxes and hazard insurance
- Title examination fee
- Title insurance fee
- Flood zone determination
- Environmental endorsements
- Recording fees
- Special mailing fees (such as Federal Express or similar)
- VA funding fee
Let’s examine the origination fee that lenders charge. This fee is limited to 1% of the loan amount. The lender can choose to charge the 1% flat fee or to itemize the following list of fees as long as they don’t exceed 1%. Keep in mind this guideline is interpreted differently by each lender, so ask your VA lender how the fees will be broken down.
- Lender’s appraisals (if a 2nd appraisal was required)
- Lender’s inspections, except in construction loan cases
- Loan closing or settlement fees (charged by title companies generally)
- Document preparation fees (lender charged)
- Preparing loan papers or conveyancing fees (charged by title company or lender)
- Attorney’s services other than for title work
- Interest rate lock-in fees (if you locked in for extended periods like 90 days)
- Postage and other mailing charges, stationery, telephone calls, and other overhead (lender charged)
- Amortization schedules, pass books, and membership or entrance fees
- Escrow fees or charges (costs for escrow, not your actual escrow)
- Notary fees (similar to closing fees)
- Commitment fees or marketing fees of any secondary purchaser of the mortgage and preparation and recording of assignment of mortgage to such purchaser
- Trustee’s fees or charges
- Loan application or processing fees
- Fees for preparation of truth-in-lending disclosure statement
- Fees charged by loan brokers, finders or other third parties whether affiliated with the lender or not, and tax service fees.
Save On Closing Costs
The easiest way to save on IRRRL closing costs is to speak with multiple VA approved lenders who can give you a written estimate of closing costs for your situation. By putting closing cost estimates from each lender side-by-side, you can easily compare and find the best deal for your situation.
Educate yourself on the fees that lenders can charge so you can get your VA IRRRL with no surprises. The VA IRRRL is a fantastic benefit for veterans who qualify. Look into one today! Ready to get started?