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How to Extend Your Home Loan Period

When you take out a home loan to buy property a number of factors will determine how much your monthly repayment will be. Factors such as the amount of the home loan, the interest rate that you qualify for and the repayment period of the loan. Home loans are usually structured over a period of fifteen to thirty years.

Most often people will take out a home loan for a period of twenty years. If you are fifty years of age the bank will not allow you to take a home loan for the maximum period of thirty years as your home loan is usually structured to be paid off by the time you go on pension.

The longer the period of your home loan the more interest you are going to pay over the full period and the difference can be huge. Make use of the home loan calculators available on the internet on the banks and other finance-related websites to calculate the difference between paying off your home loan over various periods.

From what we said above it obviously make sense to repay your home loan over the shortest period possible, so why would you consider extending the period, and can it be done? Let’s first look at whether you can extend your home loan. The answer is yes, but it is subject to the approval of the bank or your home loan financier.

They will consider your age, your repayment record and the reasons why you want to extend your home loan period. The reason for requesting an extension on a home loan term is most often to reduce the monthly payments. If your current home loan period is 15 years and you extend that to thirty years, your monthly repayments will come down.

During times of high interest rates and turmoil in the financial markets, as we are experiencing at present, many people find that they can no longer afford to pay their home loan. Before you go to the drastic step of selling your home, consider your other options, one could be to increase your home loan term and thereby reduce your monthly repayments.

Your home is your biggest investment and you must try to hang on to it for dear life. The best recommendation would be that once your financial situation improves, you convert back to paying the original monthly amount, or even paying more if you can.

Some banks may even allow you to repay only the interest on your home loan for a period to reduce monthly payments, this will extend the period of your home loan as well.

There are other instances when home loan periods can be extended. If you sell your house and buy a new house you start a new home loan all over again. You can therefore end up paying off home loans for the rest of your life! The best option will be to take the new loan over a shorter period if you can afford the monthly repayments.

Another scenario will be if you take a re-advance. If your bond is registered for R500 000 and you have paid off R100 000, you can ask for a re-advance of R100 000. Usually the bank will recalculate the loan at the remaining period and your monthly repayments will therefore increase if you take a re-advance. You can request the bank to restructure the loan over a longer period if you cannot afford the higher repayment. Remember that this option will cost you dearly in the amount of additional interest you are going to pay.

Before asking the bank to extend your home loan see if you do not have other options, financial discipline is something we all need to learn these days. If you do make use of this option, don’t make it a habit every time you get in a tight spot. Get help from a qualified financial planner or adviser on working out a proper budget. Learn as much as you can about financial matters.

Knowledge is power and ignorance is NOT bliss!

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