Calculate savings and the 36-month recoupment requirement.
Exclude taxes and insurance.
Fees to be rolled into the loan.
EEM costs (if applicable).
Base VA Funding Fee (0.5%):–
Total New Loan Amount:–
New Monthly P&I Payment:–
Monthly Savings:–
Total Refinance Costs (Fees + Costs):–
Time to Break-Even:–
Current VA IRRRL Rates Calculator: Understanding Your Break-Even
The VA Interest Rate Reduction Refinance Loan (IRRRL), often called the "VA Streamline Refinance," is designed specifically to lower the interest rate and monthly payment for veterans with an existing VA-backed loan. Unlike traditional refinances, the primary goal here is mathematical efficiency: does the reduction in rate justify the costs?
This calculator is engineered to check the specific "Net Tangible Benefit" requirements mandated by the Department of Veterans Affairs, specifically focusing on the 36-month recoupment rule.
How the VA IRRRL Works
The IRRRL is a unique financial instrument because it requires less documentation than a standard loan. Typically, no appraisal or credit underwriting package is required. However, the VA imposes strict mathematical requirements to ensure the veteran is actually benefiting from the transaction.
Key Components of the Calculation:
Funding Fee: For most IRRRLs, the VA Funding Fee is significantly reduced to 0.5% of the loan amount. This can be paid in cash or rolled into the new loan balance.
Closing Costs: These are the fees charged by the lender and title company. In an IRRRL, these are often rolled into the new loan amount to avoid out-of-pocket expenses.
P&I Calculation: The comparison must be based on the Principal and Interest (P&I) payment, excluding taxes and insurance, as those escrow items remain constant regardless of the loan terms.
The 36-Month Recoupment Rule
One of the most critical aspects of qualifying for a VA IRRRL is the recoupment period. The VA stipulates that all fees and closing costs incurred by the refinance must be recouped (recovered) through monthly savings within 36 months from the date the loan closes.
If the result is greater than 36 months, the loan may not meet VA requirements unless it is an Adjustable Rate Mortgage (ARM) refinancing to a fixed rate, or the term is being shortened.
Calculating Your Break-Even Point
Using the tool above, you can determine if a proposed rate allows you to pass the recoupment test. You will need your current principal balance and your current Principal & Interest payment (check your latest mortgage statement for the breakdown).
Why Rates Vary
Current VA IRRRL rates are determined by the bond market and lender margins. While the VA insures the loan, they do not set the interest rate. It is crucial to shop with multiple lenders, as a lower rate increases your monthly savings, thereby helping you meet the 36-month recoupment requirement more easily.
Energy Efficient Mortgages (EEM)
Veterans can also include up to $6,000 in energy efficiency improvements (like solar panels, insulation, or HVAC upgrades) in an IRRRL. While this increases the loan balance, it can provide long-term utility savings. Note that EEM costs are often treated differently in the recoupment calculation depending on the specific lender guidelines.
function calculateRecoupment() {
// 1. Get Inputs
var currentBalance = parseFloat(document.getElementById('currentBalance').value);
var currentPayment = parseFloat(document.getElementById('currentPayment').value);
var newRateInput = parseFloat(document.getElementById('newRate').value);
var newTermYears = parseFloat(document.getElementById('newTerm').value);
var closingCosts = parseFloat(document.getElementById('closingCosts').value);
var energyCosts = parseFloat(document.getElementById('energyImprovement').value);
// Default 0 for optional inputs if empty
if (isNaN(energyCosts)) energyCosts = 0;
// Validation
if (isNaN(currentBalance) || isNaN(currentPayment) || isNaN(newRateInput) || isNaN(newTermYears) || isNaN(closingCosts)) {
alert("Please enter valid numbers in all required fields.");
return;
}
// 2. Constants & Variables
var fundingFeeRate = 0.005; // 0.5% VA Funding Fee for IRRRL
var fundingFee = currentBalance * fundingFeeRate;
// Total New Loan = Balance + Costs + Funding Fee + Energy Improvements
// Note: Usually Energy costs are added to the base, and funding fee is calculated on the base,
// but for simplicity in IRRRL, the fee is usually 0.5% of the existing loan amount unless strict guidelines say otherwise.
// We will calculate Funding Fee based on the payoff amount (Current Balance).
var totalNewLoan = currentBalance + closingCosts + fundingFee + energyCosts;
// 3. New Payment Calculation
var monthlyRate = (newRateInput / 100) / 12;
var totalMonths = newTermYears * 12;
// Mortgage Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var newPayment = 0;
if (monthlyRate > 0) {
newPayment = totalNewLoan * (monthlyRate * Math.pow(1 + monthlyRate, totalMonths)) / (Math.pow(1 + monthlyRate, totalMonths) – 1);
} else {
newPayment = totalNewLoan / totalMonths;
}
// 4. Savings & Recoupment Logic
var monthlySavings = currentPayment – newPayment;
// Recoupment Calculation: (Closing Costs + Funding Fee) / Monthly Savings
// Note: In some strict VA interpretations, EEM costs are excluded from recoupment,
// but typically fees and costs must be recouped. We will use (Closing Costs + Funding Fee).
var costsToRecoup = closingCosts + fundingFee;
var recoupmentMonths = 0;
if (monthlySavings > 0) {
recoupmentMonths = costsToRecoup / monthlySavings;
} else {
recoupmentMonths = Infinity; // Negative savings means never recoup
}
// 5. Display Results
document.getElementById('resultsArea').style.display = 'block';
// Format Currency Function
var formatCurrency = function(num) {
return "$" + num.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
};
document.getElementById('dispFundingFee').innerHTML = formatCurrency(fundingFee);
document.getElementById('dispNewLoanAmount').innerHTML = formatCurrency(totalNewLoan);
document.getElementById('dispNewPayment').innerHTML = formatCurrency(newPayment);
document.getElementById('dispTotalCosts').innerHTML = formatCurrency(costsToRecoup);
var savingsEl = document.getElementById('dispSavings');
savingsEl.innerHTML = formatCurrency(monthlySavings);
if (monthlySavings < 0) {
savingsEl.className = "result-value warning-value";
savingsEl.innerHTML = "-" + formatCurrency(Math.abs(monthlySavings)) + " (Increase)";
} else {
savingsEl.className = "result-value highlight-value";
}
var recoupEl = document.getElementById('dispRecoupment');
var statusBox = document.getElementById('statusBox');
if (recoupmentMonths === Infinity || monthlySavings <= 0) {
recoupEl.innerHTML = "Never";
statusBox.className = "status-box status-fail";
statusBox.innerHTML = "FAIL: No monthly savings generated. Refinance increases payment.";
} else {
recoupEl.innerHTML = recoupmentMonths.toFixed(1) + " Months";
// VA 36 Month Rule Check
if (recoupmentMonths <= 36) {
statusBox.className = "status-box status-pass";
statusBox.innerHTML = "PASS: Recoupment is within the 36-month VA requirement.";
} else {
statusBox.className = "status-box status-fail";
statusBox.innerHTML = "FAIL: Recoupment exceeds 36 months (" + recoupmentMonths.toFixed(1) + " months).";
}
}
}