In addition to refinancing, you can also consider extending your loan tenure. Since you are given more time to pay off your loan amount, you will end up reducing your monthly payments. This is good for short term relief, but you should keep in mind that an extended tenure results in much larger amounts of total interest paid.
If you took out a $500k loan over a 15-year tenure, your monthly instalments would be $2,978. With a 30-year loan tenure, you’d pay 37% less in monthly instalments at $1,868 per month. Thus, you should speak with a home loan counsellor about term extension if you seek to significantly reduce your monthly payments. Just make sure you keep in mind that you will be paying much more in interest over the course of your tenure — in this case, 110% more.
You should also note your lender’s maximum age and loan tenure will affect your ability to extend your mortgage term. HDB flat tenures are capped at 30 years, while non-HDB properties are capped at 35 years. In addition, most providers enforce a maximum borrower age of 65 years old.
This means that if you took out your $500k home loan at age 50 for a 15-year tenure and then fell into financial hardship, you wouldn’t be able to extend your loan term to decrease your monthly payments. Instead, you could add a younger co-borrower to your mortgage to become eligible for a term extension. This can only be done if you refinance your home loan, which allows you to change the terms of your original mortgage. Adding a co-borrower can be especially helpful if they were to help you pay off the loan, as well.
