Deciding whether to refix or refinance your mortgage can seem like a daunting task, especially when your fixed interest rate is about to expire.
The decision will largely depend on your current financial circumstances, the prevailing market conditions, and the potential advantages of switching lenders.
While refixing offers the comfort of staying with your current lender, refinancing could present opportunities for better interest rates, a more suitable loan structure or even a substantial cash back.
In this week’s update, we’ll explore the factors to consider when choosing whether to refix or refinance your mortgage, helping you make a decision that aligns with your financial goals and maximises your savings.
Benefits of Refixing
Refixing your mortgage involves renegotiating your loan’s interest rate with your current lender once the fixed term ends.
It’s a straightforward process that allows you to stay with your existing lender while potentially securing a new fixed rate.
By refixing, you can lock in a new interest rate, typically before your current rate expires, thus avoiding the risk of moving to a potentially higher variable or floating rate.
The main advantage of refixing is the convenience of not having to switch lenders, which can save time and effort.
However, it may not always offer the most competitive rates.
Therefore, it’s essential to compare the refix rates with those available in the market to ensure you’re making an informed decision.
A Mortgage Adviser will have the most up to date information for what’s on offer across ALL lenders, taking the hassle out of having to shop around on your own which can be very time consuming.
Advantages of Refinancing
- Exploring Better Interest Rates
Refinancing your mortgage opens the door to potentially better interest rates, which can lead to significant savings over the life of your loan.
This is particularly beneficial if market conditions have shifted since you first took out your mortgage, making it possible to reduce your monthly payments and overall interest costs.
While the process involves switching lenders and possibly incurring some upfront costs, the long-term savings from securing a better rate often justify the effort.
- Potential Savings with Refinancing
Refinancing can lead to substantial savings by reducing your mortgage’s overall cost.
If you secure a better interest rate, you’ll decrease your monthly payments, freeing up cash for other expenses or financial goals.
Over time, even a slight reduction in your interest rate can save you thousands of dollars.
Some homeowners also use refinancing to consolidate debt, taking advantage of lower mortgage rates to pay off higher-interest loans.
- Flexibility in Loan Structures
Refinancing also provides the opportunity to tailor your loan structure to better fit your current financial situation and future goals.
This flexibility can include changing the type of mortgage product you have, for example, looking at an offset or revolving credit facility that your current bank may not have on offer.
It also allows you to adjust the loan term, which can impact your monthly payments and the total interest paid over time. For instance, opting for a shorter loan term could increase your monthly payments but significantly reduce the total interest paid, helping you to pay that mortgage off faster.
Conversely, extending the term might lower monthly payments, easing any immediate financial pressure you might be under.
This adaptability makes refinancing a valuable tool for managing your mortgage in a way that aligns with your ever evolving financial landscape, offering up options that a simple refix might not provide.
Making the Right Decision
Before deciding whether to refix or refinance, it’s important to thoroughly evaluate your financial situation. This is where working with a Mortgage Adviser can really help.
We will start by assessing your current income, expenses, and any significant changes that may affect your ability to meet mortgage payments. From there we’ll consider your long-term financial goals, such as paying off your mortgage early or saving for other investments, and how each option might impact these objectives.
We also take a look at your credit profile, as a strong credit score could enhance your refinancing opportunities and enable you to secure more favourable terms.
Finally, we work out the potential costs associated with refinancing, such as application fees and legal costs, and weigh these against the anticipated savings.
By taking stock of these factors, you can make a more informed choice that aligns with both your immediate needs and future financial aspirations, so feel free to reach out if you need a hand working out which option is best for you.
Applications for finance are subject to meeting the lenders criteria, terms, and conditions. Refer to our website www.hbmi.co.nz for our Public Disclosure Document.
