The Ultimate Strategy to Pay Off Your VA Mortgage Faster

If you qualify for a VA Mortgage as a military member, you can take advantage of its unique benefits—such as zero down payment—and use your savings strategically to save years on your mortgage. Here’s how to do it.

Step-by-Step VA Mortgage Strategy

1. Take Out a VA Loan with Zero Down Payment
   • Why this works:
     • VA loans don’t require a down payment or private mortgage insurance (PMI), unlike conventional loans. This keeps your upfront cash available for other uses.
   • What this means for you:
     • You can apply the funds you would have used as a down payment to reduce your principal balance immediately after the loan closes.
2. Make a Lump-Sum Payment Early
   • Use the 10–20% you saved by not putting it down upfront as a principal-only payment within the first few months of the loan.
   • Why this works:
     • Reducing the principal early in the loan term minimizes the interest accrued over time, saving you thousands of dollars.
     • Since mortgage interest is calculated on the remaining principal, paying down a chunk upfront significantly impacts the total cost.
3. Refinance or Reamortize After the Lump-Sum Payment (Optional)
   • Reamortizing: Some lenders will recalculate your monthly payment based on the reduced principal, keeping the original term. This lowers your monthly payment.
   • Refinancing: If you want to reduce your loan term (e.g., from 30 years to 15 years), refinancing after the lump sum can help. Ensure this is cost-effective, as refinancing involves fees.
4. Make Additional Monthly Principal Payments
   • Continue paying extra toward the principal whenever possible. Even small additional payments each month can shave years off your loan term.
   • Use biweekly payments instead of monthly payments if allowed, effectively making one extra payment per year.
5. Avoid Mortgage Interest Rate Increases (if Adjustable Rate)
   • Lock in a fixed-rate loan if possible to avoid fluctuations in interest rates, which can undermine your savings.

Example Scenario

• Loan amount: $300,000
• Interest rate: 5% (fixed, 30 years)
• Monthly payment (principal + interest): ~$1,610

Benefits of This VA Loan Strategy

1. No PMI Costs: VA loans save you hundreds per month in private mortgage insurance.
2. Faster Equity Building: Paying down the principal early gives you more equity quickly.
3. Significant Interest Savings: Early lump-sum payments save more interest than payments made later in the loan term.

Important Notes

• Confirm No Prepayment Penalty: VA loans typically don’t have one, but verify with your lender.
• Emergency Fund First: Ensure you still have enough savings for emergencies before committing the lump sum.
• Consult Your Lender: Ask how to make principal-only payments to ensure your lump sum is applied correctly.

This strategy helps you leverage the benefits of a VA loan and maximize your savings.

• VA Mortgage Website
• Mortgage Guide