Is it Possible to Use IRRRL to Refinance a Rental Property?

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The VA I nterest Rate Reduction Refinance Loan  or IRRRL is perhaps one of the best refinance loans today. Aside from lowering your monthly mortgage payments, it also junks the appraisal requirement, employment, income, and asset verification process, and can be done without any out-of-pocket expense from the homeowner. This essentially streamlines the process, helping veterans maintain homeownership while saving thousands of dollars on interest payments.

But as good as it is, the VA also sets conditions that the VA borrower or homeowner must meet before you can be approved for a rate reduction. One of these is to prove that you have previously occupied the home.

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Bypassing the Occupancy Rule

So what happens if you used the property as a rental? Will you still be able to use the IRRRL program to reach the same objective?

Unlike when you first purchased the property where you needed to certify that you occupied or intended to occupy the property, the VA IRRRL program only requires refinancers to prove that you have previously occupied it.

The VA cites that the normal terms of occupancy is within 60 days from the closing date, and a period of stay of at least 12 months. If an active duty military member is deployed even before he or she completes the occupancy requirement, the spouse can fill in his or her place and complete the required length of stay.

Again, you only have to prove to the lender that you have satisfied the occupancy requirement of the previous loan. You are still keeping the property, only changing the mortgage, thus you don’t have to prove or certify your intention to stay in the property again.

You cannot purchase a rental property via a VA loan, but that does not mean you cannot turn the property into a rental. This is common among active duty personnel who are often reassigned locations and therefore cannot stay in the home for long.

If you are planning such, now is the time to do so. With record low interest rates, you could save much on interest payments, and take advantage of a stable rate for the life of the loan.

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