An IRRRL can be done “out of pocket” by including all costs in the new loan. Some lenders may say that the VA requires certain closing costs to be charged and included in the loan. The only cost required by the VA is a funding fee* of ½ percent of the amount of the new loan. Although the process is simpler, like all loans, simplifications of the VA usually entail closing costs.
The closing costs of the VA IRRRL usually represent between 1% and 3% of the total amount of the loan, but may vary depending on the lender and other factors. All VA loans require a VA funding fee, which helps offset the costs of providing these mortgages without the need for a down payment or monthly mortgage insurance. If all goes well, a VA IRRRL could close in less than a month, which is faster than most refinances. Some greedy VA lenders have been aggressively promoting VA mortgage lending programs for veterans and have charged them higher interest rates and excessive closing costs.
Your lender may charge you an opening fee for this service, and this is one of the main costs of closing a VA IRRRL account.