Refinancing your Mortgage

What is refixing my mortgage?

When your fixed rate term comes up for renewal you can refix for another fixed rate interest rate term. The other option is to break your fixed rate term, to refix.

What is refinancing my mortgage?

It is when you move your mortgage from one bank to another, re-negotiating the terms of the loan in the process. You can either refinance during your fixed rate term, paying break fees in the process, or you can wait until your fixed rate term finishes and then refinance without break fees. There are three common reasons for refinancing; debt consolidation, where you can roll high-interest debt into your low-interest mortgage, to access more lending, or to save money.

Is refinancing going to save you money?

We only ever recommend refinancing if your own bank is unwilling to come to the party and meet your rate expectations and/or new lending requirements and LVR levels. When assessing whether refinancing is going to save you money, it’s important to consider the financial costs involved, as well as the time commitment required. But ultimately yes it will save you money – or we wouldn’t suggest it as an option.

Step 1: We’ll approach your own bank for their most competitive rates and cash retention offer (getting cashback should not drive your decision making process and is not common from your existing bank). We will assess if you can restructure with relative ease and get the products and loan terms you want and need.

If this is in line with your expectations, great! No need to refinance (swap banks). We’ll help you review your loan structure and send you happily on your way. At any one time we’ll have multiple applications with each bank across New Zealand, for many different clients, so we have a good feel for what rates you should be able to expect.

However, sometimes your existing bank will be unwilling to compete for your business or their internal way of assessing applications just will not work for you. We often find banks are a lot more eager to please their new clients over their existing clients. If your bank is unwilling to negotiate, or unable to accommodate you because you don’t meet their lending requirements, we’ll be able to help you assess other options with New Zealand’s most competitive banks.

Step 2: Before proceeding, we’ll assess the costs involved, and make sure the benefits outweigh the costs.

Refinancing usually involves a solicitor to prepare the new mortgage, and potentially paying some break fees to the bank if you have a fixed mortgage rate. We’ll add these costs into the calculation so you can see the net benefit. We can give you a 95-100% accurate representation of the end result long before you’ll need to produce a full application, without running credit checks, if you shop around yourself the credit checks will probably occur.

Generally, when figuring out whether or not it’s worthwhile to refinance, you need to calculate the difference between the interest you’re currently paying, and the interest you’d be paying on your new, lower interest rate. This interest saving, combined with a negotiated cash-back offer from the bank will show you the gross saving. After subtracting the costs involved, you’ll find your net benefit from refinancing.

Can I refinance without changing bank?

Yes! Technically it’s not a refinance, and would most likely just be a restructure of the debt. The benefit of restructuring with your existing bank is that you won’t need to open any new accounts. It’s likely you’ll still need to do a full application, and also may need to get a solicitor involved if new mortgage documents need to be signed. It’s best to speak with your iRefi Mortgage Adviser to get a better understanding of which will be the best option for you.

The downside of staying with your existing bank when doing a restructure is that you’re unlikely to get the bank’s most competitive lending offer, as they usually reserve these for new clients.