Do VA Loans Have Prepayment Penalties?

Prepayment penalties used to be a common thing when you took out a new mortgage. Lenders wanted to make sure that they didn’t lose money on the deal, so they added a penalty that they would assess if you paid the loan off early. Today, VA loans don’t have a prepayment penalty any longer. You are free to pay the loan off as you can.

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What you Can Do

Since there isn’t’ a prepayment penalty, you can pay the loan down however you want. At a minimum, though, you must make the required payments. For example, if your principal and interest payment is $1,200 each month, you must pay at least $1,200. But, if you want to pay more than $1,200 each month, you are welcome to do so.

Some borrowers don’t make extra payments each month, but rather make extra payments towards the principal in lump sums. For example, if you received a tax refund or a bonus at work, you may apply the funds to your principal balance at that time. This pays your principal down, but it doesn’t affect your payment. You still owe the $1,200 minimum payment each month. What the payment does is cut down the number of months that it will take you to pay the loan off in full.

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The Ways to Pay a Loan Off Early

So just how do you pay a VA loan off early? There are several ways, if you want a pattern to follow. Otherwise, you are free to pay extra towards the loan whenever you can. It doesn’t have to be the same amount at any given point.

If you want to follow a specific program, you can use any of the following methods:

  • Pay an extra set amount each month, such as $100
  • Pay 1/12th of your mortgage payment extra each month
  • Make one extra payment each year equal to your principal and interest
  • Apply any windfalls to the principal balance

Each of these methods can help you own your home faster. Even just an extra $100 per month can help bring your principal balance down and help you own your home faster. You can cut your mortgage payments down by a few months to a few years with consistent effort.

The good news is that you can pay your VA loan down however you want without worrying about a penalty. When the penalty was a thing, you would be unable to pay your loan off early for three years. If you did, you would pay a hefty penalty. With the absence of the prepayment penalty, you are able to pay your loan off as early as you want!

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