How to Extend Your Home Loan Payment Period

Today, banks in South Africa try to avoid repossessing homes because the National Credit Act of 2007 helps protect property owners from irresponsible lending. Instead, banks prefer home owners meet with them in order to find out if an assistance plan can be put into place.

If you want to protect yourself from foreclosure and ease the financial burden from your home loan, you may be able to do so by extending your home loan payment period. Here are some methods to consider.

Refinancing

As an example, if you hold a 20 year loan period on your home, you can greatly decrease your monthly payments by extending your home loan period to 30 years. However, by doing this, you will end up paying more towards interest throughout the life of your loan. If you have access to a savings account, you can you can put extra money in it towards your payment and the interest on your home loan may not increase because it is calculated each month based on the remaining loan balance.

Repayment Holidays

No matter if you have a floating interest or a fixed interest loan on your home, you could be eligible for a repayment holiday. During a repayment holiday, you can take a break from making payments on your home loan for a maximum of three months in a row. However, this option is usually available once every couple of years. If you go this route, you will continue to accrue interest while you are taking your repayment holiday. And when your holiday period is finished, you do not necessarily have to increase the several following monthly payments in order to pay off your home loan on time; you can apply to extend your loan period.

Criteria for Applying to Refinance

Of course, if you decide refinancing is the right decision for you, the bank will have to approve your request. When looking at your application, they will determine whether or not you are eligible by looking at a variety of factors--your age at the time of application, payment history, and reason for requesting a refinance.

Loans--Interest Only

Instead of refinancing, you could take out an interest only loan. Interest only loans are different from the other types of loans offered to those buying a home. As the name implies, the only amount you pay with an interest only loan is the interest itself, not the principle. An interest only loan lasts for a short amount of time, most often for just three years. However, these loans can be given for a repayment period of up to ten years.

And when you pay off your interest only loan, you have the options of paying towards your principle balance owed or receiving another interest only loan. This type of loan is ideal for people trying to keep their payments small for a short amount of time or expecting to have a sizeable capital gain by the time their interest only loan period is complete.