MAKING THE SWITCH: Key Factors To Consider Before You Make The Move To Another Bank.

Refinancing a home loan means replacing your current mortgage with a new one, typically to benefit from better terms or rates.

Homeowners might consider this option for several reasons. The most common is if your current lender isn’t coming to the party on a new interest rate so you look elsewhere to secure a lower one, which can potentially save thousands over the life of the loan.

Other reasons for refinancing include accessing home equity to fund large purchases or renovations, consolidating debt, or extending your loan term to lower your repayments.

However, it’s important to weigh the benefits against the costs, such as penalties for breaking your current mortgage or fees for setting up the new loan.

So before considering a refinance, it’s important to evaluate your current mortgage to determine whether it’s still meeting your needs:

Interest rate

Check if you’re still paying a competitive interest rate on your mortgage. The best place to start is by reaching out to your Mortgage Adviser who will have all the latest information when it comes to interest rates and what’s currently happening in the market.

Loan term when refinancing

Is the length of your mortgage term appropriate for your financial situation, or would you benefit from extending or shortening the term? You need to be careful here, as when you refinance you could be going into a longer loan term than what you are currently on, which means you may end up paying more interest in the long run.

Refinancing and repayment flexibility

Does your current mortgage allow for extra repayments, lump sum payments, or other flexible repayment options that suit your financial goals? Not all banks are created equal when it comes to flexibility around repayments, so a quick chat with your Mortgage Adviser will help determine the best option for you.

Costs Associated with Switching Lenders & Refinancing.

This one can catch you out if you haven’t done your homework.

While refinancing can lead to significant savings, it’s important to consider the associated costs, which may include:

Break fees when refinancing

Breaking a fixed-rate mortgage early, can result in early repayment fees (AKA break fees), or penalties which the Lender may charge in order to compensate for lost interest revenue.

Legal fees

When you refinance your mortgage there will most likely be legal fees involved. You’ll need to work with a lawyer to handle the necessary documentation and registration, but there are a couple of banks that can handle this in house for you which will save you money. Again, have a chat with your Mortgage Adviser to see which option is going to be right for you.

Valuation fees

Some lenders may require a current registered valuation of your property, which can cost anywhere in the range of $500 to over $1000 depending on your property and it’s location.

Repayment of incentives

If your original mortgage included incentives, such as a cash contribution, you may need to repay this if you refinance before the specified loyalty period ends. Even though you may get a cash contribution with your new lender, this will need to be factored into the calculations to make sure the move is worthwhile.

Working with a Mortgage Adviser to refinance your mortgage will open up the door to a wide range of loan products enabling you to secure the best terms for your needs.

I can quickly do the calculations for you to make sure a refinance is the best thing to do. As part of this service, I communicate with the bank on your behalf to get a quote for any potential break fees plus handle the negotiations with lenders on your behalf. Reach out if you need a hand!

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.