Every home buyer wants to save money on their mortgage. With VA loans, there are specific ways you can save money with the mortgage program that you can’t with others. Here are 4 keys to saving money on your VA loan.
4 Keys to Saving Money on Your VA Loan
Make a larger down payment, or don’t make one at all
One of the biggest benefits of VA loans, is that you have the option to dismiss your down payment all together if desired. If you are a first time home buyer who hasn’t saved up enough for a down payment, that alone won’t prevent you from becoming a home owner. This helps you save money on the front end. On the flip side, if your goal is to save money on your monthly payments, then a larger down payment is the way to go. The more money you put down, the lower your monthly payments will be. This is because your down payment goes toward the principal of the house, so the built up interest costs over the course of the loan will be lower.
Make an extra payment
You are allowed to make extra payments on your mortgage. This is typically the same as making a 13th payment on your loan in the span of 12 months. This helps reduce the cost of any future monthly payments. The faster you pay off your loan, the fewer dollars you’re paying toward interest. Let’s say for instance that you came upon some extra cash. Putting these funds towards your loan is not a bad way to saving money on your VA loan. Make sure to verify with your lender that making a 13th payment won’t incur any penalties.
Pay discount points
VA loans traditionally have the lowest interest rates, but there’s a way to get an even lower interest rate. Discount points are an additional fee you can pay at closing. By paying this fee, your lender will reduce your interest rate by a set amount. Yes it’s more money upfront, but over time, you will be saving money on your VA loan since you’ll have a lower interest cost per month. Remember, discount points are completely optional, but if you have extra cash on hand, you can end up saving a decent amount over the life of the loan.
Refinance to lower your mortgage rate
Refinancing isn’t unique to VA home loans. The goal is to use your equity to put toward the loan amount and refinance the loan at a lower mortgage rate. If you already have a VA loan, chances are you can save money through an IRRRL. The Interest Rate Reduction Refinancing Loan is is a VA refinance that is designed to specifically reduce the mortgage rate on your loan. With a lower interest rate, you pay less over the life of the loan. This is helpful when attempting to save money on your VA loan.
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