How to refinance your mortgage and save on interest rates
The low interest rates we saw in 2020 are beginning to trend up. If you have an interest rate review coming up, or are nervous about rate increases, it could be a great time to talk to an adviser about the options available to you.
“Rate rises seem to be hitting thick and fast, but still with a lot of variances over the banks. Years ago they all seemed to be very similar, however, now one bank will move upwards and others might not follow, or not follow for weeks” explained April Hastilow Head of Lending at Become.nz.
“Refinancing” or “remortgaging” as it is also known is when you swap your existing mortgage to another provider in order to get better terms, better structure, or borrow more. Refinancing your mortgage may seem daunting, but it is actually very simple and a normal part of owning a home.
“For years people have just been fixing for one year as rates were dropping, this is the first time in a long time we have been in an increasing rate environment,” said Hastilow.
The current interest landscape means that this could be a great time to talk to a broker about refinancing. A broker could potentially save you thousands on interest and assist you in paying off your home faster through better structures, be it through re-fixing with your own bank or refinancing to another.
However, refinancing your mortgage is more advanced than just switching interest rates as it involves repaying your existing mortgage and then taking out an entirely new one with better-negotiated terms. This may mean negotiating with your existing lender or finding a new one, and Become.nz can help you navigate this.
“We have a huge amount of experience with lending and are obtaining rates from banks every day of the week. This means we have a great idea of the best rates out there and can help clients negotiate with their banks, or if we can’t get a competitive solution we can assist in the search for a new provider. At the moment there’s a lot of uncertainty around the best structures so we can help guide with this, striking a nice balance between certainty and affordability.”
Will there be break fees if I re-finance my home?
If you’re on a fixed-rate mortgage and thinking about moving your contract to another provider, you need to look into what your bank would charge you as a break fee.
“If someone is looking to refinance there can be break fees or cash clawbacks although if someone has been with their bank for more than 3 years there often is a very minimal cost to move, and this is information that’s very fast to find out.”
It is important to compare the costs of breaking your existing mortgage with the benefits of the new ones. The team at Become.nz will provide you with all the information so you can see if taking another deal is worth it.
“Recently I had a client who had four months left on their lending but was really keen to lock in for a longer-term for certainty. Their bank had a really high set of rates for three-five years, and the cost to refinance was only legal fees of $1,000 and $50.00 admin fee. They received a $5,000 cash contribution from their new bank and saved $7,000 in interest over the 3 year term with a much lower interest rate than they could have gotten!”
If you are thinking about refinancing your home, talking to a Become.nz advisor is free and will ensure you are getting the very best deal with the lowest possible bank fees.
“We are always happy to run the numbers and then have a conversation about what they look like- numbers are pretty black and white so it’s easy for us to present the facts and then help people with whatever they decide. We just love people having more money in their back pocket!.”