How the VA Mortgage Calculator Works
A VA loan is a mortgage that is backed by the U.S. Department of Veterans Affairs. It is open to many veterans, service members and some surviving spouses. VA loans often need no down payment and no monthly mortgage insurance. Instead, most borrowers pay a one-time VA funding fee, which is usually added to the loan. The VA Mortgage Calculator estimates your monthly payment with that fee included.
What you enter
- Home price and down payment: a VA loan can be for the full price with no money down. A down payment lowers the loan and the funding fee.
- Interest rate and loan term: the yearly rate, and the number of years, such as 30 or 15.
- First use or later use: the funding fee is higher if you have used a VA loan before, unless you put at least 5% down.
- Funding fee exemption: some borrowers pay no funding fee, for example those who receive VA compensation for a service-connected disability.
- Property tax and home insurance: yearly amounts, which the calculator adds to the monthly payment.
How the funding fee works
The fee is a percentage of the loan amount, which is the price minus the down payment. It depends on the down payment, and on whether it is your first VA loan. These are the rates for a purchase loan at the time of writing:
| Down payment | First use | Later use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to less than 10% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
The VA can change these rates, and other kinds of loan, such as refinances, have their own fees. Check the current rates with the VA before you decide.
How the results are worked out
base loan = home price - down payment funding fee = base loan x fee rate total loan = base loan + funding fee monthly payment = total loan x r / (1 - (1 + r)^-n) monthly total = payment + property tax / 12 + insurance / 12
Here r is the monthly interest rate (the yearly rate divided by 12) and n is the number of monthly payments. Because the funding fee is added to the loan, you pay interest on it too.
A worked example
You buy a $400,000 home with no down payment. This is your first use of a VA loan. The rate is 6.5% for 30 years.
| Result | Amount |
|---|---|
| Base loan | $400,000 |
| Funding fee (2.15%) | $8,600 |
| Total loan | $408,600 |
| Monthly principal and interest | $2,582.63 |
| Total interest over 30 years | $521,146.78 |
Property tax and home insurance come on top of this. If you paid the funding fee in cash instead, the monthly payment on $400,000 would be $2,528.27.
The effect of a down payment
The same $400,000 home, at 6.5% for 30 years, first use:
| Down payment | Funding fee | Total loan | Monthly payment | Total interest |
|---|---|---|---|---|
| $0 (0%) | $8,600 (2.15%) | $408,600 | $2,582.63 | $521,147 |
| $20,000 (5%) | $5,700 (1.50%) | $385,700 | $2,437.89 | $491,939 |
| $40,000 (10%) | $4,500 (1.25%) | $364,500 | $2,303.89 | $464,900 |
Chart: the monthly payment by down payment
0% down ████████████████████████████████████████ $2,582.63 5% down ██████████████████████████████████████ $2,437.89 10% down ████████████████████████████████████ $2,303.89
Even a small down payment lowers the funding fee rate. Putting $20,000 down cuts the fee by $2,900, and the monthly payment by about $145.
Chart: where the money goes over 30 years
For the first example ($400,000 home, no down payment), the payments add up to $929,747 over 30 years. The bar below shows the three parts.
██████████████████████████████████████████████████
■ Price of the home $400,000 (43.0%) ■ VA funding fee $8,600 (0.9%) ■ Interest $521,147 (56.1%)
At 6.5% over 30 years, more than half of everything you pay is interest. A shorter loan, or extra payments, lowers that share a lot.
The effect of a later use
If you have used your VA loan benefit before, and you put nothing down, the fee is 3.30%. On the example, that is $13,200, which makes the total loan $413,200 and the payment $2,611.71. That is $29 a month more than at the first-use rate.
How the balance falls
For the first example, the balance is about:
| After | You still owe |
|---|---|
| 1 year | $404,033 |
| 10 years | $346,395 |
| 20 years | $227,448 |
| 30 years | $0 |
Start ████████████████████████████████████████ $408,600 5 years █████████████████████████████████████ $382,494 10 years ██████████████████████████████████ $346,395 15 years █████████████████████████████ $296,477 20 years ██████████████████████ $227,448 25 years █████████████ $131,995 30 years $0
In the first month, $2,213.25 of the $2,582.63 payment is interest. Early on, the balance falls slowly, and after 10 years you have only paid off about 15% of it.
Tips
- Check that you qualify. You need a Certificate of Eligibility from the VA, and the lender must approve you as well.
- Compare lenders. VA loan rates and fees differ, so get several quotes.
- Think about a down payment. It is not required, but it lowers the fee, the loan and the interest.
- Check whether you are exempt. If you receive VA disability compensation, you may not have to pay the funding fee at all.
- Add the full cost of owning the home. Taxes, insurance, repairs and utilities can be large.
What this calculator does not include
- Closing costs, lender fees, appraisal and other one-time costs.
- Homeowners association dues, and flood or other special insurance.
- Refinance loans, such as the VA interest rate reduction loan, which have their own fees.
- Rates that change. It assumes a fixed rate for the whole term.
- Your loan limit and eligibility, which the VA and the lender decide.
This tool gives an estimate for general information only. It is not financial or legal advice. Your lender and the U.S. Department of Veterans Affairs set the real fees, rates and rules.