VA Streamline Refinance after Death, Divorce, or Marriage
There are many rules to be aware of when it comes to changing the borrowers named on a mortgage when getting a VA streamline refinance (also known as an Interest Rate Reduction Mortgage (IRRRL)).
A VA streamline refinance might be used when a veteran gets married, divorced, re-married, or another kind of co-borrower changes between the time the home was purchased and the time of the refinance.
The general rule of thumb is that the eligible Veteran must remain on the loan. It’s the entitlement of the Veteran that makes the VA loan possible.
Fortunately, there is an exception for when the deceased veteran and spouse purchased the home as joint borrowers. In this case, an IRRRL may be possible even though it’s only the Veteran’s spouse on the loan.
When borrowers have changed since the home purchase
Here’s what the VA lending handbook says about VA streamlines when the veteran gets married, divorced, passes away, or changes co-borrowers:
- Can an unmarried Veteran add a spouse with an IRRRL? Yes.
- Can the divorced Veteran remove a former spouse with an IRRRL? Yes.
- Can a divorced and re-married Veteran remove the former spouse and add the new spouse with an IRRRL? Yes.
- Can an eligible Veteran refinance into their own name with an IRRRL, substituting their entitlement, even though another Veteran originally purchased the home? Yes.
- Can a spouse who originally purchased the home with a Veteran use an IRRRL to refinance if the Veteran dies? Yes, as in the case of my cousin.
- Can a Veteran remove a non-spouse with whom he or she originally purchased the house using an IRRRL? Yes.
- Can a divorced spouse of the eligible Veteran use an IRRRL to refinance? No.
- Can the spouse of a Veteran refinance with an IRRRL if they were married after the home purchase and then the Veteran died? No.
- Can the spouse of a Veteran refinance with an IRRRL if they were not on the original VA loan, and the Veteran died? No.
- Can the new spouse of a Veteran refinance using an IRRRL if he or she was not on the original loan and the Veteran died? No.
- Can a non-Veteran refinance using an IRRRL if he or she originally purchased the home with a Veteran, but the eligible Veteran is now deceased or otherwise not going to be on the loan? No.
As you can see from these examples, the majority of the time, the eligible Veteran must remain on the loan. After all, without their entitlement, there can be no VA loan.
Also keep in mind that the VA lender may require some income documentation when a borrower is removed, such as in the case of divorce or death. This is because the lender may want to make sure that the remaining borrower can still make the payments since the former borrower’s income has stopped.
There are a lot of things that can happen in life. And the ins and outs of VA home loans can be difficult to understand. It is my hope this information will help you understand what a VA streamline refinance loan is, the situation in which it is used, and how it can apply to you and your relationship status.