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    Calculates locally in your browser · VA streamline refinance
    Mortgage / VA refinance

    VA IRRRL recoupment

    An IRRRL is the streamlined refinance of an existing VA loan: no appraisal, no underwriting, no occupancy test. What it does require is a net tangible benefit, and the VA defines that as recouping the closing costs within 36 months out of the payment saving. That test — not the rate — decides whether the loan is allowed.

    RecoupmentPassesRateLowerFee0.50%
    Monthly saving
    $297
    $2,026 → $1,729
    Recoupment
    16 mo
    inside the 36-month limit
    Costs to recoup
    $4,500
    $3,000 closing plus $1,500 fee
    Interest saved
    $10,224
    over the current remaining term
    The IRRRL test
    The VA allows the loan only if the closing costs are recovered within 36 months of the payment saving.
    Eligible
    The IRRRL test
    ItemValueNote
    Current balance$300,000300 months left
    Current payment$2,0266.500%
    Funding fee$1,5000.50% of the balance
    Closing costs$3,000lender and title
    New loan$304,500balance plus costs
    New payment$1,7295.500% over 360 months
    Monthly saving$297positive
    Recoupment16 monthslimit 36 months
    VerdictEligibleThe costs are recovered in 16 months, inside the 36-month limit. The payment falls by 297 a month.

    The recoupment test is what makes an IRRRL different from an ordinary refinance: a loan that lowers the rate but adds enough cost to take four years to pay for itself is not allowed, however good the rate looks.

    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    Recoupment against the new rate
    The 36-month line is the eligibility boundary, not a preference.
    Recoupment against the new rate0.00010.0820.1630.2440.3250.404%4%4.5%4.5%5%5%5.5%5.5%6%6%6.5%6.5%Months
    Saving against cost
    The test is simply whether the cost is smaller than 36 months of the saving.
    Saving against cost0.0002520.805041.597562.391.008e+41.260e+4296.70Monthly savingMonthly savingCostsCosts36-month saving36-month savingDollars
    Canonical equations
    The exact relationships implemented by this engine.

    0.50% × balance · Waived if exempt.

    balance + costs + fee · Costs are financed.

    costs / monthly saving · Must be ≤ 36 months.

    rate falls and recoupment ≤ 36 · Both required.

    finance methodology

    A clear path from inputs to results.

    An IRRRL is the streamlined refinance of an existing VA loan: no appraisal, no underwriting, no occupancy test. What it does require is a net tangible benefit, and the VA defines that as recouping the closing costs within 36 months out of the payment saving.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter the current balance, rate and months remaining.
    2. Set the new rate, term and closing costs.
    3. Say whether you are fee-exempt.
    4. Read the recoupment period against the 36-month limit.

    The formula

    recoupment=closing costs+0.005×BPold−Pnew\text{recoupment} = \frac{\text{closing costs} + 0.005 \times B}{P_{old} - P_{new}}

    Reference: VA Pamphlet 26-7 Chapter 6; funding fee under 38 CFR 36.4313.

    Worked example

    $300,000 from 6.5% to 5.5%

    Inputs
    • $300,000 balance, 6.5%, 300 months left.
    • New rate 5.5% over 360 months, $3,000 closing costs.
    • Not exempt.
    Calculation path
    1. 1

      The current payment is $2,026 a month.

    2. 2

      The funding fee is 0.50% of $300,000, or $1,500, and with the closing costs the new loan is $304,500.

    3. 3

      At 5.5% over 360 months the payment is $1,729.

    4. 4

      The saving is $297 a month against $4,500 of costs.

    5. 5

      That is 16 months of recoupment, comfortably inside the 36-month limit.

    Result

    $297 a month · 16 months to recoup · eligible.

    Interpreting the result

    The recoupment test is what separates an IRRRL from an ordinary refinance. A loan that cuts the rate but adds enough cost to take four years to pay for itself is not allowed, however attractive the rate looks — and extending the term to 30 years is the usual way a borrower fails it.

    Assumptions & limitations

    • The funding fee is 0.50% and financed.
    • Closing costs are financed into the new loan.
    • The new rate is below the current rate, or the loan moves from an ARM to a fixed rate.
    • No appraisal and no credit underwriting.

    Frequently asked questions

    What makes it streamlined?

    No appraisal, no income verification, no occupancy requirement and minimal underwriting — because the VA already guarantees the existing loan and the balance does not increase beyond the costs.

    Can I take cash out?

    No. An IRRRL cannot increase the loan beyond the costs of the refinance, which is what distinguishes it from a cash-out VA loan.

    Is the fee always 0.50%?

    Yes for an IRRRL, and it is waived entirely for a veteran with a service-connected disability rating.

    Why does extending the term cause a failure?

    Because a longer term lowers the payment, which shortens the recoupment, but it also raises the total cost. In practice a borrower with 25 years left who refinances to 30 years can pass the test on payment while paying more overall.

    What if I have a second mortgage?

    A subordinate lien can remain if it is resubordinated, but it cannot be paid off with IRRRL proceeds.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.