In New Zealand, even if my fixed term hasn’t expired yet, should I re-fix my mortgage now to take advantage of the current low rates? We see many clients who don’t know that their fixed mortgage periods can be adjusted. Also, we have seen many clients who have struggled on their own to balance the cost of re-fixing, along with other hidden downsides, against the savings they make in interest. What’s more, should I refinance my mortgage and switch banks? Not only can you secure a lower interest rate, but you may also receive a cash incentive from your new bank. But, what are the costs involved in refinancing my mortgage?

Should I re-fix my mortgage now or wait for my fixed term to expire later? 

Video Timeline

1. Even if my fixed term hasn’t expired yet, should I re-fix my mortgage now to take advantage of the current low rates? – 00:06

2. Why Prosperity Finance doesn’t recommend you re-fix your mortgage by yourself.  – 02:58

3. Should I refinance my mortgage and switch banks? – 03:18

4. What are the costs involved in refinancing my mortgage? – 03:37

1. Even if my fixed term hasn’t expired yet, should I re-fix my mortgage now to take advantage of the current low rates?

Last November, my fixed-term mortgage had an interest rate of 4.29% and it was set to expire on May 2019.

Based on my remaining loan balance of $460,000, if I had kept things the same, the interest payable within the six month period would have equalled $9,867.

To capture the current low rate of 3.95%, I considered re-fixing my mortgage before waiting for the fixed term to expire. In this instance, my bank could charge me a one-off mortgage break fee of $314.52. As an aside, it’s important to point out that actual break fees vary wildly, depending on the term of your mortgage and your remaining balance.

So, I needed to balance the cost of my bank’s break fee against re-fixing my loans at a much more competitive interest rate. So, I calculated the interest payable at the new rate of 3.95%. Based on this calculation, I would need to pay $9,085 in interest. I then added this amount to the bank’s break fee to reach a total cost of $9,399.52.

Therefore, if I had decided not to re-fix my mortgage, and instead waited for my current fixed term to expire, I could have lost more than $500 within the six month period.

Plus, I had four more similar loans to consider.

After careful analysis, I decided to re-fix my mortgages, so that I could save up to $5,000 in interest in one year across my five mortgages.

At Prosperity Finance, we see many clients who don’t know that their fixed mortgage periods can be adjusted. If they don’t seek advice from a professional mortgage broker, they might re-fix their mortgage at the end of the fixed term, and potentially miss out on securing competitive rates.

2. Why Prosperity Finance doesn’t recommend you re-fix your mortgage by yourself

Technically, you can re-fix your mortgage yourself, at any time. However, the process can be complicated, time-consuming and involve a degree of analysis. We have seen many clients who have struggled on their own to balance the cost of re-fixing, along with other hidden downsides, against the savings they make in interest. That’s why it’s important to talk to Prosperity Finance. As trusted and professional mortgage brokers, we can help you make the right decision.

3. Should I refinance my mortgage and switch banks?

If you can secure a lower rate from another bank, you might consider switching. This process is called re-financing, and it gives you the opportunity to take advantage of more favourable terms and conditions offered by other banks. When refinancing your mortgage, not only can you secure a lower interest rate, but you may also receive a cash incentive from your new bank. Prosperity Finance has relationships with New Zealand’s major banks, so we know who is prepared to go the extra mile to acquire your business. 

4. What are the costs involved in refinancing my mortgage?

On the surface, refinancing can seem like a great idea. Who doesn't want to have a lower interest rate? However, the truth is refinancing incurs additional costs that may actually counteract the benefits.

So, if you are thinking about switching banks, you should not only consider the potentially lower mortgage rates but also ensure that the benefits outweigh the costs.

As a guide, here are some of the costs you may incur when switching banks:

• If your new bank has a lower interest rate, you may not be able to take full advantage of the favourable terms and conditions.
• Legal costs: You need to engage a solicitor when signing new mortgage documents.
• Recall of cashback incentives: Many banks offer cashback incentives to borrowers who choose to break their current loans and bank with them instead. If you switch banks within a certain time period, you might need to return the cash incentive.

Whether you’re a New Zealand property investor or a regular home buyer, refinancing or re-fixing will either work well for you or be an unwise decision. It all depends on your unique situation and an understanding of the pros and cons. That’s where Prosperity Finance can help. As experienced mortgage advisers, refinancing and re-fixing are a key part of our toolkit, and we adopt a strategic outlook to help you make an informed decision. Get in touch with us today to find out how we can help you re-fix or refinance, and discover the right strategy and timing for you. 

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.

TALK TO US NOW! 

Phone: 09 930 8999 

Email: support@profin.co.nz

Other Recommended Blog:

Your 2019 Update: New Zealand mortgage rates reach a historic low as major banks offer sub 4% rates