5 Tips to Pay Off Your VA Loan Fast

Tim Lucas
Military VA Loan editor

Homeowners often assume they should make their mortgage payments, and nothing more. But big rewards come from making seemingly small extra payments on a mortgage.

Here are strategies to pay off your mortgage years earlier, saving thousands in interest.

Check your VA home buying eligibility. Start here (Jun 23rd, 2024)

5 tips to pay off your VA loan faster — and pay less interest

1. Pay $100 extra each month

Have extra cash each month and want to put it to good use?

How about turning $100 per month into $28,000? You can do just that by prepaying your mortgage each month.

Say you have a 30-year fixed mortgage at 4.00% on a $250,000 loan amount. If you add $100 to your mortgage payment each month, you reduce the amount of interest paid over the life by $28,000. That’s what $100 can do.

VA loans don’t have prepayment penalties. They never have. That means it’s okay to pay extra whenever you want.

That sounds like a great idea, but are there other ways to pay down a mortgage faster? Yes – read on.

2. Sign up for a biweekly payment

By default, your mortgage will require monthly mortgage payments. However, some homeowners choose to make biweekly payments. Depending on your loan, this can translate into paying off your loan more quickly — and less total interest.

Monthly mortgage payments mean you’ll be making 12 payments a year. With a biweekly payment program, you’ll pay half of your monthly mortgage payment amount every other week instead. That works out to 26 payments a year — or 13 monthly payments.

Using the very same 30-year loan at 4.00% on a $250,000 note, the amount of interest is dramatically reduced and the life of the loan is reduced from 30 years to 26.

There are companies who will offer to manage a biweekly plan for you for a slight fee. Some lenders can offer this service to their borrowers as well. But you don’t have to pay someone else to set up a bi-weekly program for you. You can do the very same thing on your own.

3. Refinance into a shorter term

VA refinances come are available in 15, 20, and 25-year terms. Shorter-term loans usually come with lower rates. You can reduce the interest you pay plus lower the number of years you’ll be paying by completing a simple refinance.

Check your VA mortgage rates. Start here (Jun 23rd, 2024)

4. Make 1/12 extra payment each month

Instead of making payments every other week, you can accomplish the very same reduction in loan term and interest saved by making a little bit extra each month. Here’s how it works: divide your normal principal and interest payment by 12, then add that amount to your regular monthly payment.

A monthly principal and interest payment of $1,000 turns into $1,080.

Your loan is paid down in the very same manner a bi-weekly program will do—and you don’t have to pay any setup charges or have someone else manage a bi-weekly loan plan for you.

5. Make a one-time principal reduction payment

Get a bonus last quarter? Do you have a windfall and you’re not sure what to do with it?

There are no prepayment penalties, so any amount extra you pay goes directly to your loan balance. This saves interest and reduces the loan term.

Say you have $20,000 and you can pay it toward your outstanding loan balance. Over 30 years at 4.00%, you’re saving more than $34,000 in interest to the lender over 30 years.

Different lenders may have various ways to make a one-time principal reduction payment. But the result is the same. By law, the lender must apply extra funds to your principal loan balance.

What are today’s VA rates?

Mortgage rates are low and VA rates are even lower than those of standard mortgages.

Get a rate quote now from an approved VA lender. It costs nothing to start the process, and there’s never any obligation to continue if you’re not satisfied with your quote.

Check your VA home buying eligibility. Start here (Jun 23rd, 2024)