Can I Extend My Mortgage Term And Lower My Monthly Payments?
Extending your mortgage term is possible and won’t affect your monthly payments. However, it will increase the total interest you pay. You can extend your term up to 35 years, but only if your lender permits it.
Lengthening your mortgage term: should you do it?
When you take out a mortgage, you agree to make monthly repayments over a set number of years – usually 25 or 30. This timeframe is known as your “mortgage term”.
By the end of your term, your regular payments will have fully paid off your loan and you’ll own your home. But some homeowners think about extending their original term to lower their monthly bills.
But What are the potential upsides and downsides of stretching out your payments? Read on to find out.
Why extend your mortgage term? The potential upsides
Extending the length of your mortgage repayment period can have some advantages if done carefully and strategically. Here are some of the key benefits you could see:
- Lower Monthly Bills: Stretching out your mortgage over more years typically means smaller monthly payments. This can grant some financial breathing room if money is tight.
- More Cash Available: Since your payments drop when you lengthen your term, you may free up cash to put toward other important costs or investments each month.
- Added Flexibility: Having a longer timeframe to repay your loan allows more flexibility to adjust your budget if your situation changes unexpectedly.
Avoid Falling Behind: Managing lower monthly payments could help you avoid missing payments or defaulting on your mortgage if times get tough. This protects your credit score as well.
What are the risks of extend the mortgage term?
While a longer mortgage repayment period can have some benefits, there are a few key drawbacks to weigh as well before extending your term. These include:
- Bigger Interest Bill: You may wind up paying more total interest over the full lifetime of your mortgage loan if you add more years to it.
- Owing for Longer: Since you’d make payments over a longer timeframe, it would take more time until your home loan is completely paid off.
- Changing Rates: Some lenders could raise your interest rate when you lengthen your mortgage term, raising your overall costs.
- Limited Options: Not all mortgage lenders or products allow you to extend your repayment term, restricting what deals you can switch to.
Carefully balancing these risks against the potential rewards is crucial before committing to a longer mortgage term. Checking all fine print with your lender is essential too.
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Tips for successfully lengthening your mortgage term
Want to change the length of your home loan repayment period? Here are some top ways to boost your odds of qualifying to extend the term of your mortgage deal:
- Stay Current on Payments: Lenders like to see you’ve made all your monthly bills on time without any overdue amounts. This shows you can handle the loan.
- Have at least 20% Equity: If your outstanding mortgage balance is 80% or less of your home’s value, extension approval is more likely.
- Prove You Still Qualify: Showing the lender you meet income rules and can repay over the new longer timeframe is key.
- Have a Repayment Strategy: For interest-only mortgages, providing a plan for eventually paying the full balance builds confidence.
Meeting these conditions signals you’re a “low risk” for lenders if they give you more years to repay your mortgage loan. Ask us for help optimizing your application!
Can you extend the term of an interest-only mortgage?
With an interest-only mortgage, you only pay the interest due every month – not anything toward the actual loan amount or “principal”. Your balance stays the same over the repayment term, which is usually 25 years at most.
By the end of your set term, you must repay the full loan amount in one lump sum. So when that date comes closer, some borrowers ask to stretch out their timeframe even longer.
Extending an interest-only mortgage is possible in some cases. But most lenders will want to see your strategy for eventually clearing the balance, such as:
- Savings built up to cover the remaining principal
- Money from selling your pension investments
- Proceeds from selling the home (if you have enough equity)
Providing a solid payoff plan often helps lengthen interest-only terms. Ask us for tailored advice on your options and chances!
Other options beyond extending the mortgage term
If your goal is to lower your monthly mortgage bills, there are a few alternatives to carefully consider before committing to a longer repayment period:
- Switch Lenders for Better Rates: Getting quotes from different lenders could help you find more affordable interest rates and payments.
- Pay Down Your Mortgage Balance: Reducing what you owe improves your loan-to-value ratio, potentially qualifying you for lower rates.
- Change Your Mortgage Type: Ask about switching part or all to a repayment mortgage, which may allow better terms.
- Modify Your Existing Deal: Your current lender may be able to tweak your existing mortgage product in a way that cuts your costs.
While stretching out your timeline is one option, exploring these other paths first could provide mortgage relief without as much long-term risk or commitment. Our brokers can advise on the best route for you.
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How can expert mortgage brokers assist you?
Deciding if lengthening your mortgage repayment term makes sense for your situation can be confusing. That’s where working with a dedicated broker from Expert Mortgage Brokers offers key benefits.
Our experienced advisers take the time to understand your unique financial circumstances and goals. We’ll explain your options around extending your term or pursuing alternatives to find the right solution for you.
With access to exclusive mortgage products and rates across the market, we can save you time researching deals yourself. We’ll negotiate on your behalf to secure optimal terms and monthly payments.
As your trusted partners, Expert Mortgage Brokers will make sure you fully grasp the pros, cons, and alternatives before moving forward. We offer ongoing support if your needs change down the road as well.
Get in touch for personalised guidance on managing your mortgage term and payments. Together, we’ll create a plan to fit your budget and priorities both now and in the future.
Final thoughts
Deciding whether to lengthen your mortgage repayment period is an important choice requiring careful thought. While potential benefits like lower monthly bills may attract you, risks ranging from higher total interest to less mortgage flexibility also exist.
Before committing to extend your term, be sure to explore alternatives like switching lenders or mortgage types for better rates first. An experienced broker can explain these options and help determine the smartest route for your situation.
For personalised guidance on managing your mortgage term and payments, contact the experts at Expert Mortgage Brokers. We’re here to provide advice tailored to your needs now and in the future.
