You took out a VA mortgage loan because you needed financing to purchase a home. But suddenly, your financial situation has changed. Perhaps you’ve received a large inheritance. Or maybe you got a promotion or took a new job with a higher salary. Now you’re wondering, should I pay off my loan early?
Below, we’ve provided some advice on the matter.
Paying Off Your VA Mortgage Loan: What You Need to Know
If you have the ability to pay off your VA loan early, it’s definitely something you should consider doing. Paying your loan early could save you a ton of money on interest costs. You can then take that money and apply it towards other expenses, put in a savings account, or invest it elsewhere.
That being said, here are some important facts you should know about prepayment for VA mortgage loans:
No Prepayment Penalties
The VA does not allow lenders to charge a prepayment penalty for VA loans. With other types of loans, such as conventional mortgages, prepayment penalties may apply. In these instances, borrowers can be charged a fee for paying off their home loan early. But if you have a VA loan, you don’t have to worry. You can pay your loan off early without being penalized.
Restoration of Entitlement
Another benefit of paying off your VA loan is the restoration of your entitlement. A military borrower’s VA entitlement is restored when their loan is paid in full. You can then use your full entitlement to buy a new home.
Strategies for Paying Off Your Loan Early
In addition to making a lump sum payment, there are methods you can use to pay off your loan early. You can make payments bi-weekly or make one extra mortgage payment each year. You can also pay extra on the principal each month. All of these strategies can help you pay off your VA mortgage loan early.
Disadvantages of Paying Off Your Mortgage Early
Believe it or not, there are some potential disadvantages to paying off your home loan early. For one, mortgage interest payments are tax-deductible, and you’ll no longer be able to take advantage of those deductions. Secondly, if you have other high-interest debt like credit card debt, you could be missing a huge opportunity. In this case, instead of paying off your mortgage, you may want to focus on tackling that high-interest debt first.
That being said, everyone’s financial situation is different. If you’re not sure which option is right for you, you can always reach out to your lender for help.
Talk to a VA Mortgage Expert
Our VA mortgage loan experts are always available to answer your questions. Call today to get in touch!
