IRRRL – What You Need To Know Before Refinancing Your VA Loan

The Interest Rate Reduction Refinancing Loan (IRRRL) offers current VA mortgage holders an excellent opportunity to take advantage of low interest rates. But before you call your lender, there's a few things you need to know.

1. The new interest rate must be lower than your existing rate. To make it worthwhile your new interest rate should be at least 1 % lower than your existing rate.
2. Under the IRRRL program, you cannot receive cash proceeds from the refinance. This means that if your existing mortgage is $90,000 you cannot tack on $20,000 from the home's equity for a remodeling project. However, you can add up to $6,000 for energy efficiency improvements.
3. You do not need to reapply for a Certificate of Eligibility. The lender can electronically receive confirmation from the VA.
4. The VA does not require an appraisal or credit check. However, your lender might require these documents.
5. If your current mortgage is an FHA or Conventional loan, you cannot refinance through the IRRRL program.
6. You cannot combine your existing mortgage and a second mortgage under the IRRRL program.
7. You don't need to pay any upfront fees. All refinancing costs can be built into the loan.
8. Contrary to popular belief, you do not need to refinance with the lender holding your existing mortgage. Any lender can provide you with an IRRRL.
9. Fees and terms vary among lenders and unfortunately some lenders prey upon Veterans. According to the VA, "Some lenders may say that VA requires certain closing costs to be charged and included in the loan. The only cost required by VA is a funding fee of one-half of one percent of the loan amount which may be paid in cash or included in the loan."

Refinancing isn't the best solution for everyone. However, for homeowners who want to lower their mortgage payments, especially if their current interest rate is at least 1% above the going rate, it may be an option worth looking into.

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How to Consolidate Student Loans

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Hight debt loads from student loans can be hard to manage, especially if you have multiple loans with different financial institutions. consolidating student loans may offer interest rate reductions, or make it easier to manage your monthly student loan payments. This page includes information on what it means to consolidate loans. If the debt from financing your education has become a multi-headed beast of numerous payments and variable interest rates, consolidating your student loans can be the means to securing a single--possibly lower--fixed rate for the life of your loan. Here, you can learn if consolidating your loans is the right plan for you, and how you can go about turning all those bills into a single financial responsibility.


Consolidating your student loans generally means one lender will group together multiple loans. The new lender will buy out the other loans and will be your primarily lender Instead of managing numerous simultaneous payments and interest rates, the consolidated loan will compile them into a single loan at a new, fixed rate. The main benefits of consolidation include one contact and payment point, a fixed interest rate and the potential to decrease your monthly payments.1 While consolidating your loans may be a good option, you should investigate your options, as consolidating student loans have regulations and implications that may not be beneficial to every situation.

Student Loan Consolidation Rate In Federal And Private Consolidation

 

This video features an interview on the subject of student loan consolidation. There is apparent controversy over the differences in guidelines between federal and private loans. Interest rates are another point of contention as federal loans have fixed interest rates, private consolidation loans tend to fluctuate, causing long term uncertainty for the borrower.

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Step 1: Decide Whether to Consolidate

There are pros and cons to consolidating depending on your particular situation. Before you rush to consolidate, consider the factors below.
Consolidating your loans at a fixed rate means that if rates go up, yours will stay put. Alternatively, if there is a sharp dip in interest rates, you will still be paying the same fixed rate. So if you think rates will plummet, it might be best to wait things out.2
Make sure your loans can be consolidated: consolidation loans are available for most federal loans, including FFELP loans (which include Stafford, PLUS, and SLS loans), FISL, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. There are also private consolidation options available for private student loans.
You might pay more overall when you consolidate because you are extending the life of the loan (even if monthly payments are lower). Do note, however, that the interest you pay on your student loans is tax deductible. Evaluate the pros and cons of consolidation] with your particular loans in mind to determine if it's worth consolidating. You'll also need to decide if consolidating all your loans is a good idea, or if you should just consolidate some of them. Because your rate is determined as an average of your current rates, you may want to keep a higher rate loan out of the equation.3

Step 2: Consolidate Your Federal Loans

• Consolidating your federal loans means you will pay one monthly bill and will determine a fixed rate for the life of your loan. This rate is generally lower than that of a private consolidation offer.

1. To determine your consolidation rate for your federal loans, a lender will calculate a weighted average of your current loan rates and then round up to the nearest 1/8, but not to exceed 8.25%.
2. Calculate your potential consolidation rates using FinAid's consolidation calculator.
3. Your interest rate also depends on the type of federal loans you have and when you took them out.
4. You can lock in a lower consolidation rate by consolidating during your grace period (the several months immediately after graduation, during which most lenders will not force you into repayment). Consolidating during your grace period, while ultimately helpful because your interest rate is lower, does force you into immediate repayment, even if you still had a few months left before scheduled payments were to begin.
5. Because Stafford loan holders who graduated in 2007 or after will pay fixed rate interest, it's not as clear that they should consolidate as it has been in the past.
6. Note you cannot consolidate loans if you are currently in school.
7. It is not recommended that borrowers consolidate federal loans into a private loan because you will lose important privileges to defer, apply for a forbearance, or qualify for loan forgiveness under government programs.
8. And under no circumstances should you pay a fee to consolidate your federal loans.

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Step 3: Consolidate Your Private Loans

It is possible to consolidate private loans, as well, and this chance may be worth taking if your credit score is higher now than it was when you took out the original loan. You may be able to consolidate your loan with your original lender. It might be best to start there to see what rates may be available to you. If your lender is not offering a consolidation rate that is appealing, you'll need to comparison shop to find the best consolidation offer.4 Note that private consolidation loans are based on your credit score, and/or that of your co-signor's. You may get a lower rate if you apply to consolidate with a co-signor who has excellent credit. Be sure to research any associated fees before you determine that it is financially advantageous to consolidate your private loans.

Step 4: Keep Up with Student Loan News

Keeping up with student loan news if you haven't yet consolidated all your loans will help you determine if it is a good idea going forward. It could be worth checking in with your school's financial aid department to see if they have an opinion on your consolidation plans or recommend a particular lender. Use non-profit resources to find information about different lenders or to contact legal or financial advisers who can help you.5 The New York Times also has a "Times Topic" about student loans that functions like a database of all the current student loan news. Check it regularly to keep up to date on student loan information.6 FinAid, a site recommended for its financial aid advice, made a recent statement regarding changes in student loans and consolidation in the wake of the Financial Crisis:

• • "Borrowers may be concerned by the possible impact of the subprime credit crisis on the cost and availability of federal and private student loans. Federal loans will remain available, although loan discounts will likely be reduced significantly. A higher minimum balance may be required to consolidate. Private student loans will likely have stricter eligibility restrictions, requiring a higher credit score or a cosigner. There may be increases in the interest rates and fees on private student loans. Lenders will encourage borrowers to make payments of interest while they are in school."7

Disclaimer

The content of this page is intended for general informational purposes only and is not a substitute for professional financial advice. Contact your loan administrator or financial aid counselor for more information.

 

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