How to extend your home loan

Most home loans in South Africa are given for a period of fifteen to thirty years. The period over which you are repaying your home loan is one of the main factors that decide on what is the final amount of money you need to invest in your home. Generally, longer time periods for a home loan means lower monthly installments for it, as the period over which the loan is repaid is longer. However, this usually also means that the interest rate for this loan will be significantly higher, as the bank is taking over added risk when issuing you such a loan. Here we will talk about the possibilities of extending your home loan, and when and why it should be considered.

When to Extend Your Loan

Generally, extending your home loan is not a good idea. The added costs for this far exceeds the short term savings you would get from such a step. However, in certain situations, having your home loan extended is a good option. For instance, today, with all the economical turmoil in the world, more and more people are finding it impossible to pay off their monthly installments. In this situation the only possible alternative to selling one`s home is to get an extension of your home loan. Although this will cost you more money in the long run, it will help you keep your home. And as your home is probably the thing you invested in the most over the years, it might be viable to accept the added costs of a loan extension in order to keep it. There are other instances when you might be forced to extend your home loan. If, for instance, you sell your house, and buy a new one, you will have to take a new home loan, which will effectively result in an extension of your home loan. This is also generally a bad option, and should be avoided, if possible.

The Conditions for Extending a Home Loan

Before you get your home loan extended, you must get the approval of the bank. The bank will consider your age, your repayment record and the reasons you wish to extend your home loan. Your age is important because, for instance, if you are 50 years old, and have a 15 years of outstanding home loan, the bank is not very likely to approve you an extension to lets say, 25 years. Home loans are designed to be paid off during one`s active working years, not when he retires. Also, if your repayments weren`t good in the past, the bank is less likely to take the risk and allow you for an extension.

So, although extending your home loan is not a financially savvy idea, you can turn to this method if you need a relief for your budget, and have no other means of refinancing your loans. Just remember to always try to hold on to your home, as it is your most valued possession.