The VA loan calculator is a tool to help you understand the cost of your cash advance, but it doesn’t guarantee 100% that your calculations are accurate. It’s best to contact a lender and ask questions.
The calculator is based on the average or lowest rate most lenders represent for each loan type. You can learn more about the VA Loan process on this website, as well as a tool to contact a lender in case you have any questions. The calculator gives you an understanding of how much interest you’ll be charged and how much money it will cost if you pull out the cash advance before your agreement is up.
VA Interest Rates: VA Interest rates are offered at a discount to the current market rates. The VA loan rate is fixed and doesn’t change during the life of the loan. It can be a prime rate, LIBOR, or Certificate of Deposit Index + percentage points based on your credit history (the higher your credit score – the lower you repay). To find out the real interest rate you have to ask a lender and then compare that to this calculator, and you’ll know for sure.
Calculation Example: Example assumes $20000 cash advance for 40 months with an interest rate of 4%. The Annual Percentage Rate (APR) is 4%. Cash advance amounts and payments do not include taxes and fees.
The VA Loan calculator has been developed with the following assumptions:
- 100% approval rate.
- the .ame % of veterans make all-cash advances every year, or a decent fraction of that
- The majority of applicants have a low credit score (below 700). Some people might grumble about some creditors lending to people with a low credit score, but for the sake of simplicity and in the interest of fairness, we assume that in the VA system, everyone’s credit score stays close to their average (capitalism applies).
- the same principle applies here – if you’re above average on your test scores, you pay slightly more interest. If you’re below average, you pay less.
- The interest rate is 4% on loans. The real rate is not stated because it varies based on your credit score and the lender.
- To see the real APR ask lenders or brokers in your area before you apply. You can also find out what happens if you do not pay back the cash advance – late fees, penalties, etc.)
- The borrower’s name has been omitted because it’s a common name that would not be helpful.
- In reality, these monthly payments could be higher or lower than shown depending on whether the applicant has other debts (like student loans) that are paid back more slowly than this loan. These other debts would be treated as a priority, and you would have to make payments for the first.
- Repayment of the loan is dependent on your ability to pay it and on when you decide to sell your home. For example, if you decide to sell your home earlier than you planned, then you could convert the cash advance into a regular mortgage and repay that instead. You could also decide not to sell your home at all while still paying off the cash advance loan normally.
- The assumed length of this loan is 40 months. This can be longer or shorter in reality based on what is right for the borrower’s financial situation.
- The borrower is assumed to make monthly payments of $1,000. This means that they are paying $41,209 in total. Of this amount, $35,209 is going toward the principal, meaning the accountholder’s amount. The rest ($6,000) covers fees and interest charges. The remaining balance will be considered part of the cash advance if the loan is paid off early or converted into a regular mortgage during repayment.
The calculator provides some answers to some common questions that often come up during the VA loan process.
What are my minimum monthly payments?
The calculator will tell you what your minimum payments would be with the cash advance and does not consider other debts that could be paid off at different times. For example, if you have another loan that is paid back more slowly than the VA Loan, the cash advance would still be reduced for those months when those other loan payments were made. Example: If the cash advance is $20000 and aside from it, there is a home equity line of credit ($2000), then you would still need to make a payment of $1,000 per month. More important than the minimum understands what this means to you in total.
What is my cash advance APR?
This number represents the average interest rate you will pay on this loan. The VA Loan calculator does not include other charges like fees or taxes that could push your final APR up higher. For example, if you have a credit card and pay 18% interest, the cash advance would cost you more than 18% before taxes and fees. See below for more details.
What is the APR of a regular mortgage?
If you pay back your cash advance directly with a regular mortgage instead of paying it off early, you will get a different cash advance APR. This will be higher than what you get when paying back the lender in monthly payments. Ask the lender what they would like you to do and understand which option works best for your situation.
The calculator also considers that some people may find it more difficult to go through the process because many forms and documents need to be filled in. The calculator assumes that every form is filled out correctly. If this is not true, then your final costs could be much higher or lower than shown here.
If the VA Loan calculator does not answer your question, compare the answers to the questions you have. If you have more than one kind of loan, then look at all of them to see what your costs would be if you converted all of them into a mortgage. An example would be “rate locked” loans from credit card companies with a higher interest rate than mortgages but do not include taxes or fees.
This is an example of how interest works for a scenario where the borrower has no other debts other than their VA Home Loan:
- The cash advance is $20000 and has an APR of 4%. This means that they will pay 4% interest before taxes and fees.
- The regular mortgage is $20000 and has an APR of 5%. This means that they will end up paying 5% interest.
You can get a lower interest rate on a regular mortgage by paying off the cash advance early. If you had bought a house with this same amount of money, then you would have paid approximately $2,600 less in interest for each year spent as “owner-occupied”. You also would have saved about $5,000 per year by waiting to pay off the cash advance and taking out a regular mortgage instead.
Note: These numbers are estimates. They do not consider any taxes or fees that may push your total costs up higher or lower than what is shown here.