On many standard mortgages, lenders will include a prepayment penalty clause. This means that if you pay off your loan early in whole or in part, you’ll be charged a fee.
Why would they do that, you ask? Lenders make their money on interest payments. By paying off your mortgage earlier than the full term, you’re paying less in overall interest. That’s good news for you, but bad news for lenders. That’s why they’ll charge you more for paying early.
Many homeowners will make lump sum payments on top of their monthly payments to knock down their debts sooner. Homeowners who refinance their mortgages do so by using a new loan to pay off their old loan. Both of these situations count as prepayment.
The VA home loan does not penalize for prepayment. By guaranteeing that you won’t be charged a fee for paying off your VA home loan early, the Department of Veterans Affairs is giving you the chance to potentially save tens of thousands of dollars on interest payments without worrying about being assessed a penalty. You can feel free to make extra payments to get out of debt early, or refinance to a better mortgage rate.
For more information about a VA loan, contact a VA-approved lender.