Prepay VA And Save: There’s No VA Loan Early Payoff Penalty

Did you know you could save thousands of dollars by paying your VA loan off early? The bigger the loan amount and the higher the interest rate, the more you can save by prepaying. Plus, there’s no VA loan early payoff penalty.

Make Bi-Weekly Payments

Your mortgage is almost always due monthly on a specific date. However, you can choose to pay it bi-weekly instead. As long as the full payment is in by the due date, your mortgage will be considered fully paid. This method is ideal if you get paid on a weekly, bi-weekly, or semi-monthly basis.

Example: Your mortgage is $1,000 per month and due on the final day of every month. Instead, you decide to pay $500 every two weeks. Your monthly mortgage payments would have totaled $12,000 if paid every month. However, 26 payments of $500 equals $13,000. That’s an extra payment on your mortgage every year.

Add a 13th Payment

Instead of paying extra in small increments over time, you could make an extra payment at the end of the year. It might seem like the same result, but there’s a difference. Mortgage interest is calculated based on the remaining balance, so the less money you owe each month, the lower your total interest. Even so, this strategy is ideal if you typically expect a big year-end bonus.

Example: Your mortgage is $1,000 per month. You pay $1,000 by the usual due date every month but add an extra $1,000 at the end of the calendar year or 12 months from the day your mortgage first began.

Pay a Little Extra Each Month

If neither the year-end lump sum nor making bi-weekly payments appeal to you, you can try paying a pre-determined additional amount on your mortgage each month. You could alter this each month to suit your financial situation. This method is ideal for people who have a variable income, such as retired veterans with side gigs.

Example: Your mortgage is $1,000 per month. The first six months of the year is the busy season for your side gig, so you put an extra $100 on your mortgage each month. However, the last six months are your slower seasons, so you can only put $50 extra toward your mortgage each month. That amounts to $600 for the first six months and $300 for the last six months. That’s almost an extra mortgage payment by the end of the year.

Bonus Tip: Check With Your Lender

For some loans, your extra payments will be applied to the interest, which has a much lower impact on your pre-payment strategy. Always verify with your lender that the additional payments will go directly toward the principal balance.

Connect With The Experts

At National Home Loans, we’re proud to help military service members, veterans, and their families with their VA loans. And with no VA loan early payoff penalty, there’s a real opportunity to save on your mortgage. Call us if you have questions!