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5 Types of VA Loan Repayment Plans


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TERMINOLOGY

If you get a VA loan, there are a number of repayment plans that you could use to pay the money that you owe. Here are some of the different types of VA loan repayment plans that are available.

1. Traditional Fixed

With this type of repayment plan, you are going to get the same type of terms that you will be able to get from any traditional fixed-rate loan. The lender is going to take the total amount of money that you owe and add interest to that amount. They are then going to divide the total by the number of monthly payments that you have. This is going to provide you with a fixed monthly payment over the entire life of the loan. Each payment is going to reduce the amount of principal on the loan and part of the payment will go towards interest as well. As you get further into the loan, you are going to be paying off more of the principal and less interest with each payment.

2. Graduated Payment

Another type of repayment plan that you could choose with a VA loan is the graduated payment plan. With this type of repayment plan, you are going to start off with a smaller monthly payment and work your way up to a larger one. For the beginning portion of the loan, you are typically going to get approximately 5 years of a mortgage payment that is smaller than you would normally be paying. Every year after that for a certain amount time, your monthly payment is going to increase. Eventually, your payment is going to be bigger than what it would be with a fixed payment mortgage. This type of payment plan can be beneficial to those that have a low income now but expect it to increase in the future. 

3. Growing Equity

With this type of repayment plan, your payment is going to gradually increase in order to pay off the principal of the loan faster than normal. Every bit of increase is going to go directly towards the principal on the loan which will help retire the balance quicker. In most cases, you can pay off your mortgage in as little as 11 years with this type of repayment plan.

4. Traditional ARM

Another option that you might have is to use a traditional adjustable-rate mortgage repayment plan. With this type of repayment plan, your interest rate is going to change every year, based on a financial index. This type of repayment plan is a little bit risky because you do not know how much your payment is going to increase over the years.

5. Hybrid ARM

The hybrid ARM is another option that you might have. With this type of repayment plan, you are going to get a fixed interest rate for a certain number of years and then the loan will change to an adjustable-rate mortgage. This allows you to lock in your interest rate for a certain amount time which will usually give you a lower interest rate initially.