First Rate Mortgages

A man shaking hands with a mortgage broker for the second mortgage

Refinance Your Mortgage in NZ - Top FAQs Answered

With the current state of the economy and the increasing interest rates, many homeowners are feeling the strain of their mortgage repayments. It’s a common concern, but there are options available to help ease this burden. One such option is to refinance or remortgage your home. 

Refinancing usually involves taking out a new mortgage to replace your existing one, with the goal of securing a lower interest rate or changing the terms of your loan. This can result in lower monthly repayments, making it easier to manage your finances and maintain your home. 

Another reason to consider refinancing is to consolidate your credit card debt. By combining your high-interest credit card debt with your lower interest mortgage, you can potentially save money on interest payments and simplify your monthly repayments. 

The benefits of remortgaging are numerous. Not only can it lower your monthly repayments, but it can also help you to pay off your mortgage faster, build equity in your home, and improve your overall financial situation.  

It is a big decision, so we have completed a summary below of the many questions we are asked:

How does refinancing work?

Refinancing often involves moving from one Bank to another or a Non Bank lender. 
You may be looking to consolidate debts, get a lower interest rate and repayments on your mortgage or free up cash for family, business, investment, or even a holiday. Sometimes this is a good idea to get an interest only period, so your repayments reduce to a more manageable level as we go through the cost of living crisis. 

What are the pros of refinancing my mortgage?

Many clients approach us to refinance as they are getting nowhere with their Bank or their local branch has closed. Personal service has been replaced with offshore call centres, online texting or fake people speaking, or you can be on an 0800 for 30 minutes, “your call is important to us, you are now number 15 in the queue”. Changing banks will mean arranging for your direct debits, automatic payments and salary to be changed to a new account number. You will need new ATM cards and often different Credit Cards. 

You may also be able to secure a loan that better suits your needs like a fixed, floating, flexi or offset loan. 

You will be up for legal costs and a mortgage discharge fee, however some Banks are now offering substantial cash incentives, up to 1% of your loan amount, to help with this. Terms and conditions apply. 

What are the rules for refinancing?

The first thing is, there is no point in refinancing unless you are putting yourself in a better position. 
Refinancing can be time consuming and require a lot of paperwork. Your bank statements will be looked at closely to check how you spend your money, this will include day to day living costs, hobbies, childcare, any loans and even your social life, how often do you go out for dinner or buy lunch. Sometimes you have to look at these things 3 months prior to a refinance so you can change your habits.  
But as they always say, if you don’t do something different, nothing changes! 

How much does it cost to refinance a mortgage?

It will cost you money if you wish to refinance to a new Bank or Non Bank lender. If you are on a fixed rate there can be break fees, BUT, when rates are rising these may be minimal or even zero. Check at the outset with your Bank or Mortgage Broker. Legal fees can be $2,000 -$3,000 and your first call to check would be your personal Solicitor. There are also Conveyancing Centres”, and they can be cheaper.  
Time can be another cost; do you get help from a mortgage broker or go and see the banks yourself. There will also be the need to complete an application, provide bank statements, ID, rates notice and possibly a Registered Valuation which could cost say $1,500. 
Refinancing may also be an appropriate time to discuss your wills, or setting up a family trust and certainly it is a good time to review your personal life, income and medical insurance cover. This could even save you money.

Need help with refinancing your mortgage? Contact our experienced and friendly team at First Rate Mortgages today!