Prepayment, Assumption, and Interest Rate

VA loans offer significant flexibility. There are no prepayment penalties, so veterans can pay off their mortgage early without a fee. Additionally, VA loans are assumable, meaning a buyer can take over the veteran’s existing mortgage. Interestingly, the person assuming the loan does not have to be a veteran, though the original veteran may lose their entitlement privilege until the assumed loan is paid off unless the buyer is also an eligible veteran who "substitutes" their entitlement. Finally, the interest rate on a VA loan is not set by the government; it fluctuates based on the financial markets and is negotiated between the veteran and the lender.