VA Funding Fee Financing Calculator

The VA Funding Fee Financing Calculator helps estimate what happens when the funding fee is added to the mortgage balance. It can show the estimated financed fee, new loan amount, and potential effect on the monthly principal and interest payment.

This can help borrowers compare paying the fee upfront with including it in the new mortgage.

What Does Financing the VA Funding Fee Mean?

When the funding fee is financed, the fee is added to the amount borrowed rather than being paid entirely from cash at closing.

For example, if the base loan amount is $300,000 and the applicable funding fee is $6,450, financing the fee would produce a new loan amount of:

$300,000 + $6,450 = $306,450

The borrower therefore preserves the cash that would otherwise be used for the fee, but the financed amount becomes part of the mortgage balance.

The Three Numbers to Compare

A useful way to evaluate funding fee financing is to compare three figures:

1. Base loan amount
2. Funding fee amount
3. Final loan amount after financing

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The actual funding fee percentage depends on the applicable VA loan circumstances and current VA rules.

How the Calculator Estimates the Financed Amount

The calculator starts with the base loan amount and applies the applicable funding fee percentage.

The basic calculation is:

Funding Fee = Base Loan Amount × Funding Fee Percentage

The resulting fee can then be added to the base mortgage amount:

Financed Loan Amount = Base Loan Amount + Funding Fee

For example, using a hypothetical 2.15 percent funding fee on a $300,000 base loan:

$300,000 × 2.15% = $6,450

The resulting financed balance would be $306,450.

This example is for illustration. The applicable funding fee for an individual borrower depends on the specific loan circumstances.

Financing the Fee vs Paying It Upfront

Borrowers generally need to consider the tradeoff between preserving cash and increasing the mortgage balance.

Paying the Fee Upfront

The funding fee is paid separately rather than being added to the loan.

This keeps the initial mortgage balance lower, but requires additional cash at closing.

Financing the Fee

The funding fee is incorporated into the mortgage balance.

This reduces the amount of cash needed for that particular expense, but the borrower pays interest on the additional amount over the life of the loan.

The better comparison depends on the borrower's available cash, loan terms, interest rate, and financial objectives.

How Financing Affects the Loan Balance

When the funding fee is financed, the mortgage begins with a higher principal balance.

For example:

Base loan: $400,000

Funding fee: $8,600

New financed balance: $408,600

The additional $8,600 becomes part of the mortgage principal.

As the loan is repaid, payments are applied toward this larger balance according to the mortgage terms.

The Monthly Payment Can Also Change

Because financing increases the loan amount, the principal and interest payment may also increase compared with a loan where the funding fee is paid separately.

The exact difference depends on:

• Loan amount

• Interest rate

• Loan term

• Funding fee amount

• Other financed costs

For example, a borrower comparing a $400,000 mortgage with a $408,600 mortgage should calculate the payment for both balances rather than assuming the difference in principal is the same as the difference in monthly payment.

Example Comparison

Consider a hypothetical borrower with a $400,000 base mortgage and an $8,600 funding fee.

If the fee is paid upfront:

Mortgage balance = $400,000

If the fee is financed:

Mortgage balance = $408,600

The borrower who finances the fee keeps more cash available at closing but starts with an $8,600 higher mortgage balance.

That difference can continue to affect interest costs and principal repayment throughout the loan.

Why Cash at Closing Matters

The decision is not simply about the size of the mortgage.

Cash available at closing can also be important.

A borrower may prefer to preserve cash for:

• Emergency reserves

• Moving expenses

• Home improvements

• Furniture and household expenses

• Property related expenses

• Other financial needs

Financing the funding fee can reduce the cash required for that specific charge, although other closing expenses may still apply.

Financing Does Not Mean the Fee Disappears

A financed funding fee is still a cost.

Instead of paying the amount separately at closing, the borrower adds it to the mortgage balance and repays it through the loan.

This means the borrower should consider both:

Immediate cash requirement

and

Long term financing cost

The second factor can be particularly important when the mortgage is kept for many years.

Compare the Long Term Cost

Suppose a borrower finances an additional $7,000 through a mortgage.

The financial impact is not limited to the original $7,000.

Interest can accrue on the additional principal according to the mortgage terms.

For that reason, a borrower comparing funding fee options should consider:

1. Additional amount borrowed
2. Interest rate
3. Loan term
4. Expected time in the mortgage
5. Monthly payment difference
6. Available cash reserves

The calculator provides the starting point for that comparison.

Funding Fee Exemptions

Not every eligible VA borrower is required to pay the funding fee.

Certain borrowers may qualify for an exemption under applicable VA rules.

If an exemption applies, there may be no funding fee to finance.

Because eligibility for an exemption depends on the borrower's specific circumstances and current requirements, borrowers should confirm their status with the appropriate VA or lending professional before including a funding fee in their calculations.

Funding Fee Financing for Different Loan Types

The funding fee can arise in connection with different types of VA backed financing.

The applicable percentage and circumstances can vary depending on factors such as:

• Type of VA loan

• Borrower's prior use of VA loan benefits

• Down payment circumstances

• Applicable VA requirements

• Exemption status

Therefore, the calculator should use the funding fee percentage applicable to the specific transaction rather than assuming one percentage applies to every borrower.

When Financing the Fee May Be Considered

Borrowers may want to model financing the fee when they are trying to preserve cash at closing or when paying the entire fee separately would reduce their available reserves.

The calculation can also be useful when comparing multiple loan structures.

Instead of looking only at the fee amount, compare the resulting loan balances and estimated payments.

A Simple Side by Side View

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This comparison does not include other transaction costs and should not be interpreted as a complete closing cost estimate.

What the Calculator Does Not Determine

The VA Funding Fee Financing Calculator is designed to estimate the financing impact of the fee.

It does not independently determine:

• VA eligibility

• Funding fee exemption status

• The legally applicable funding fee percentage

• Final lender charges

• Property taxes

• Homeowners insurance

• Escrow requirements

• Final loan approval

The final figures should be confirmed using the actual terms of the proposed VA loan.

Frequently Asked Questions

What is a VA Funding Fee Financing Calculator?

It estimates the amount of funding fee added to a VA mortgage when the borrower chooses to finance the fee rather than pay it separately at closing.

How is the financed funding fee calculated?

The base loan amount is multiplied by the applicable funding fee percentage. The resulting fee can then be added to the mortgage balance.

Does financing the funding fee increase my loan amount?

Yes. When the fee is financed, it becomes part of the principal balance of the mortgage.

Does financing the fee increase my monthly payment?

It can. Because the mortgage balance is higher, the principal and interest payment may increase compared with paying the fee separately.

Do I pay interest on a financed funding fee?

Yes. Once the fee becomes part of the mortgage balance, it is subject to the interest and repayment terms of the loan.

Can I pay the funding fee instead of financing it?

Depending on the transaction, a borrower may be able to pay the fee rather than adding it to the mortgage. The available options should be confirmed with the lender.

Is every VA borrower required to pay a funding fee?

No. Certain borrowers may qualify for an exemption under applicable VA requirements.

Does the funding fee percentage stay the same for every borrower?

No. The applicable amount can depend on the type of transaction and the borrower's circumstances.

Can I use the calculator before applying for a VA loan?

Yes. It can be used as a planning tool to estimate how financing the fee could affect the proposed mortgage balance.

Is financing the funding fee free?

No. Financing means the fee becomes part of the mortgage balance, which can result in interest being charged on that additional amount.

See What the Funding Fee Does to Your Mortgage

The decision to finance a VA funding fee affects more than the amount shown at closing. It changes the starting mortgage balance and can influence the payment and interest cost over time.

The VA Funding Fee Financing Calculator gives you a practical way to estimate that difference before reviewing the final loan figures.

Enter your loan amount and applicable funding fee information to see how financing the fee could change your mortgage. For a personalized calculation, Merchants Home Lending can help you review the actual loan terms, applicable fee, and available financing options.

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