- In the previous article, we explained what a mortgage grace period is and how to apply for one. If a homebuyer chooses to apply for a grace period, the main purpose is usually to give their finances some breathing room during the initial stage. But will the repayment process really go as smoothly as expected?
- In reality, cash flow problems may still arise. Late payments or missed payments may lead to the property being seized, auctioned, and may also damage the borrower’s credit.
- Therefore, many homebuyers may want to know whether a mortgage grace period can be extended. This article explains the pros, cons, and methods for extending a mortgage grace period.
|Table of Contents|
|
|
1. Can a Mortgage Grace Period Be Extended?
-
Yes.
-
As long as the borrower has made all payments on time during the repayment period and has a good personal credit record, banks are usually willing to allow an extension of the mortgage grace period.
-
However, it is important to note that the longer the grace period is extended, the higher the total mortgage amount payable will become. Before extending the grace period, you should first evaluate whether your repayment ability can handle the later payment amounts.
2. Will Extending the Grace Period Affect Credit?
-
Yes.
-
Banks are usually willing to consider a first extension.
-
However, if the grace period has already been extended once and the borrower wants to extend it again or refinance the mortgage, the borrower may be viewed as having insufficient repayment ability, which may affect the borrower’s credit.
3. Can Early Repayment Be Made During the Mortgage Grace Period?
-
Yes.
-
However, an early repayment penalty may apply. This depends on whether the mortgage agreement signed with the bank includes terms allowing early repayment.
4. How Do You Extend a Mortgage Grace Period?
-
The application process is quite simple. Since the bank already has the borrower’s basic information, the borrower only needs to first notify the bank by phone, then visit the bank in person to complete the application form. The bank will then review the applicant’s qualifications. If the review is approved, the mortgage grace period will be extended.
-
Important notes for extending a grace period:
-
The property must be a self-use residence.
-
Mortgage payments must be normal, with no record of late payment.
-
The maximum extension period depends on the bank. For ordinary mortgages, the grace period is generally capped at 5 years.
-
-
Friendly reminder: In the past, only a small number of people used mortgage grace periods, and most grace periods lasted only 1 to 2 years. However, under the New Qing’an Housing Loan policy, a 5-year grace period is available. As a result, the number of people using grace periods has increased significantly in recent years. Banks have therefore become stricter when reviewing grace period applications, making approval more difficult. Be sure to make payments on time during the grace period and maintain good credit, as this will increase the chance of approval.
5. What Are the Pros and Cons of Extending a Mortgage Grace Period?
-
Advantages of Extending a Mortgage Grace Period
-
Reduced repayment pressure: During the grace period, only interest needs to be paid, while repayment of the loan principal is temporarily deferred. This can greatly reduce monthly repayment pressure.
-
More flexible use of funds: Since the loan principal does not need to be repaid during the grace period, the accumulated cash flow can be considerable. This gives the borrower more flexibility and room in fund allocation.
-
Disadvantages of Extending a Mortgage Grace Period
-
Impact on future bank loans: To a bank, applying to extend a mortgage grace period may be similar to debt negotiation. This may increase the chance of being declined when applying for other bank loans in the future.
-
Increased pressure after the grace period ends: Once the extended grace period ends, the previously unpaid principal and interest will be spread across the remaining repayment periods. At that point, the borrower may clearly feel the increased repayment pressure.
- Central bank rate hikes may affect mortgage interest rates: Since 2022, Taiwan’s central bank has implemented interest rate hikes, which have also caused bank loan rates to rise. This is less favorable for mortgage borrowers, especially those applying to extend a grace period, as the financial burden may become heavier.
6. What Should You Do If You Cannot Make Payments After the Mortgage Grace Period Ends?
-
You should make the payment as soon as possible within the buffer period and contact the original lending bank to confirm whether the contract provides a payment buffer period. Generally, there may be a one-week buffer period. Therefore, if the missed payment is within one week, repaying it as soon as possible may be sufficient.
-
In addition to applying to extend the grace period, the following four options may also be considered:
-
Extend the Mortgage Term
-
In addition to extending the grace period, the borrower may apply to extend the mortgage term. For example, the original 20-year term may be extended to 30 years. A longer term can reduce the monthly payment and ease repayment pressure.
-
-
Mortgage Refinancing
-
The mortgage may be transferred to another bank. If the new bank approves the refinancing application, the borrower may have a chance to apply for another grace period with the new bank.
-
However, when refinancing, pay attention to three possible costs:
-
Penalty charged by the original bank: If the mortgage is still within the lock-in period with the original bank, a penalty must be paid to the original bank.
-
Application fees charged by the new bank: When refinancing, handling fees and land administration agent fees must be paid to the new bank.
-
Government fees arising from refinancing: In addition to the two possible costs above, land office registration fees must also be paid again.
-
-
-
Debt Consolidation
-
If the borrower has other small loans in addition to the mortgage and is under heavy repayment pressure, debt consolidation may be considered to reduce the overall loan burden.
-
-
Second Mortgage
-
For a property that still has an existing mortgage, the borrower may apply to a bank or financing company for a second mortgage.
-
Because banks review these applications strictly and the approval rate may not be high, applying for a second mortgage through a financing company may be considered.
-
Although the interest rate for a financing company second mortgage is higher, the review process is more flexible and the available loan amount may be higher.
-
-
-
Conclusion
-
From the above, we can see that extending a mortgage grace period can effectively reduce repayment pressure. However, if the extension is merely used as a way to avoid repayment pressure, it only postpones the pain of repayment. Debt problems must still be faced eventually.
-
Therefore, before applying, you should fully understand the pros and cons of extending a mortgage grace period and consider whether it truly meets your needs, so that you can make the best choice for yourself.
-
【全謹代書事務所社群上線啦！】
看文章卻覺得字太多、太複雜嗎？
快來追蹤【全謹代書事務所】官方
FB、IG、YouTube、TikTok(抖音)、小紅書
想看簡單易懂的圖文，或是想透過生動活潑的短影音學習知識，官方社群都能滿足你！
看文章卻覺得字太多、太複雜嗎？
快來追蹤【全謹代書事務所】官方
FB、IG、YouTube、TikTok(抖音)、小紅書
想看簡單易懂的圖文，或是想透過生動活潑的短影音學習知識，官方社群都能滿足你！
.png)
▲點擊進入【全謹代書事務所】官方FB帳號
▲點擊進入【全謹代書事務所】官方IG帳號
(1).png){kind=spacer}
.png)