Understanding VA IRRRL Recoupment

A Guide to Strategic Refinancing

What is Recoupment? Recoupment ensures that all closing costs associated with a VA IRRRL are recovered within 36 months through monthly savings. The VA mandates this rule to protect borrowers from incurring long-term losses.

Why Does It Matter? Imagine unlocking the potential of your refinance with a plan designed for maximum savings. Recoupment is critical because:

• Saves Money: Keeps costs low and ensures financial stability.
• Ensures Loan Approval: Meeting the VA’s 36-month requirement avoids delays or rejections.
• Empowers Strategic Refinancing: Enables informed decisions about loan structure and timing.

What Counts Toward Recoupment?

1. Origination Charges (Section A): Processing and underwriting fees.
2. Closing Services You Cannot Shop For (Section B): Credit report and flood certification.
3. Closing Services You Can Shop For (Section C): Title insurance and settlement costs.
4. Taxes and Government Fees (Section E): Transfer taxes and recording fees.

How to Maximize Recoupment When rates are dropping, minimizing upfront costs maximizes future savings:

• Avoid maxing out 36-month costs unless qualifying or planning long-term refinancing.
• Evaluate the break-even point between programs:
  • Program A: $5,000 costs, $2,000 monthly payment.
  • Program B: $1,000 costs, $2,150 monthly payment.

If you plan to refinance in 12–18 months, Program B ensures greater flexibility and savings.