Aug 13, 2018 10:06:07 AM

Refinancing Your Mortgage

Topics: Mortgages, NZ Mortgage Adviser, NZ Property Market, NZ Property, Housing Market, Refinancing Options, refinancing, Mortgage Debt, mortgage stress 0

Refinancing your home loan has a number of benefits. A lower interest rate or better terms could help you pay off your mortgage much faster and help you reach your financial goals sooner. But, it’s important to be aware of the shortcomings too. Take a look at what you need to look out for when refinancing your mortgage.

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Benefits of refinancing

The number one reason home owners choose to refinance is to get a lower interest rate on their mortgage. Lower interest rates mean smaller repayments each month, saving you a substantial amount of money over the life of your loan. And paying less towards your mortgage each month frees up extra cash to put towards other things you may need.

Refinancing could also mean better terms, shaving years off your home loan and helping you get debt-free that much sooner. Switching from a variable to a fixed interest rate could provide you with stability and peace of mind knowing exactly how much you’ll be repaying each month. And refinancing could be an opportunity to tap into your home’s equity and use that money to finance home renovations, a family holiday or pay medical bills. 

Disadvantages of refinancing

Even with interest rates as low as they are right now, there are still some shortcomings to consider when refinancing your mortgage. Cost is a major factor and it’s vital you weigh up the cost of refinancing against any potential long-term savings.

You may be required to pay the lender’s fee for underwriting and processing your new loan, as well as any lawyer’s fees, appraisal fees and survey fees. Breaking your home loan early by refinancing could also result in significant penalties charged by your existing lender. And, while refinancing your loan term may lower your monthly repayments, it could end up costing you more over the long-term as your loan term is extended. 

It’s worthwhile shopping around and comparing deals before making any decisions to avoid paying out more than you’ll be saving.

Top tips to refinancing

1. Make sure you’re clear on what needs to be repaid to your existing lender and ensure your new loan covers these costs.
2. Shop around and compare deals before making any decisions.
3. Look beyond the bottom line and compare all aspects of each lender’s product and service offering.
4. Do the maths – calculate exactly how much you’ll be saving against how much you’ll need to spend to refinance. 

Knowing when to refinance

If you only have a few years of payments left on your mortgage or you’re planning to move home in a few years, it’s probably not worthwhile refinancing. But, with interest rates at an historical low, it’s a good idea to review your mortgage anyway to ensure you are getting the best deal.

Get in touch with a Mortgage Express adviser to help you review your mortgage and assess whether or not refinancing is the right option for you.


Disclaimer:

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.

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