VA Home Loan Repayment Plans
VA Loans Process
Once you secure a VA home loan, staying on top of your mortgage payments is critical. Veterans and military members often have questions about mortgage payments and what follows once you’re beyond closing day.
The maximum VA home loan term is 30 years and 32 days; however, the term may never be for more than the remaining economic life of the property as determined by the appraisal.
Fixed and Adjustable Mortgage Interest Rates
For new military homebuyers, choosing a fixed or adjustable rate mortgage (ARM) is an important decision. A fixed interest rate mortgage secures the same rate for the life of the loan, while an ARM has an interest rate that changes monthly, biannually or annually depending on economic variables and the type of loan.
Even though ARMs come with risk in economic indices, VA loan ARMs are limited on how much the rate can increase annually (no higher than 1 percent) and overall during the life of the loan (no higher than 5 percent of loan’s original interest rate). With most ARMs, the initial interest rate is lower than that of a fixed mortgage. That can help boost a buyer’s purchasing power, but every buyer’s situation is different.
Picking your interest rate type is an essential part of setting up your payment plan for your VA loan, so make sure you work with your lender to do some math and forecast your financial future.
Here’s a look at some common questions and answers.
May a veteran pay off a VA loan before it becomes due?
Yes. A VA loan may be partially or fully paid at any time without penalty. VA loans have long allowed veterans to avoid prepayment penalties, which have become increasingly common in recent years for all loans.
If a veteran dies before the loan is paid off, will the VA guaranty pay off the balance of the loan?
No. The surviving spouse or other co-borrower must continue to make the payments. If there is no co-borrower, the loan becomes the obligation of the veteran's estate. Protection against this may be obtained through traditional life insurance or mortgage term insurance, which must be purchased from private insurance sources.
Will the veteran's payments always be paid to the same company?
No. It is common practice in the mortgage lending industry to sell mortgages and mortgage servicing rights, often before the first payment is even due. Lenders are required to notify you in advance if this happens, and there’s a grace period if you send the first couple mortgage payments to the wrong company.
Does having a VA loan limit a veteran's right or ability to sell the property?
No. A veteran may sell the property to a veteran or non-veteran at any time. However, if the loan was closed after March 1, 1988, and it will be assumed, the qualifications of the assumer must be reviewed and approved by the lender or VA.
When a veteran sells the property to someone who will assume the existing VA loan, is the veteran released automatically from personal liability for repayment of the loan?
No. If the loan was closed after March 1, 1988, the lender or VA must be notified and requested to approve the assumer and grant the veteran release from liability. If the loan was closed prior to March 1, 1988, the loan may be assumed without approval from VA or the lender. However, the veteran is strongly urged to request a release of liability from VA. Veterans will typically need to have another borrower with VA loan entitlement agree to substitute their entitlement for the homeowner’s in order to keep their full entitlement intact.