The banks make it easy these days to refix your mortgage via their banking apps – but most people don’t realise that even though it is easy and convenient to lock in a new interest rate on your app, you are entering into a contractual agreement with the bank that you will maintain for the rest of the fixed term.
So if for some reason you need to break that contract in the instance you sell the property or switch banks, then you may be up for some “break fees” or early repayment costs that you weren’t aware of. As with any contract you enter into, when it comes to refixing your mortgage it’s best to seek advice from an experienced Mortgage Adviser beforehand.
Another reason not to rush in at refix time is to make sure that you are actually getting the best deal available.
Unfortunately you can’t do this with just a banking app.
This is where engaging the services of a Mortgage Adviser will give you the upper hand. I deal with all the banks on a daily basis, so we can quickly spot if there is going to be a better deal for you elsewhere.
When your fixed rate is up for renewal you want to take this chance while you aren’t locked into anything, to really optimise your loan structure.
If you didn’t do it right last time, or your financial situation has changed, then now is your chance to make sure that your new loan structure is fit for purpose – especially if you are having to move onto a higher interest rate.
Getting creative with your mortgage can actually save you some money in the long run. We can look at different scenarios to help optimise your mortgage such as the ones below:
Loan Splitting: Splitting your loan across different fixed rate terms is another good option, so if interest rates go up only a part of your loan will be affected, and your monthly repayments won’t increase too much. But, it’s also important not to choose a loan term that’s too long because then you might miss out on lower interest rates in the future. So finding a flexible balance is the name of the game!
Offset Mortgages: Another great way to lower your repayments is to utilise any money you may have sitting in your savings and everyday accounts to “offset” the interest payments on your mortgage.
This type of loan is known as an offset mortgage. With an offset mortgage, the aim is to maximise the funds you have in your accounts each day to offset the balance on your mortgage. As an example, if you have a $200,000 mortgage and $10,000 across your savings and everyday accounts with the one bank, they would only charge interest on the difference, which in this case would be $190,000.
Check out this informative video from Kiwibank which gives a good illustration of how it works.
There are only three banks currently offering this product so make sure you have a chat with me to see if it’s suitable for you. If you are not currently with a bank that offers this product, then now would be the time to get you properly sorted with one that does and truly put your money to work for you!
Refinancing: If you’re about to come off a low fixed rate and are worried at the thought of higher repayments, then refinancing might be a good option for you.
At the moment banks are offering some nice incentives when it comes to refinancing such as cashbacks or cash contributions. If you are going to struggle with the higher repayments then we can look to extend your loan term at the same time which can lower your repayments to give you some breathing space until interest rates reduce again or by having a portion on interest only.
Debt Consolidation: When your fixed rate loan is up for renewal and you have outstanding balances on credit cards, hire purchases or car loans (which are always at much higher interest rates than your mortgage), by combining these loans and consolidating them into your mortgage will help you to pay them off faster, saving you a significant amount of money in interest payments.
There is a trick to structuring this correctly to make sure you don’t end up paying MORE in interest, which an experienced Mortgage Adviser can guide you on.
Fees: If there are any potential fees like break costs, early repayment fees or cashback clawbacks we can make sure this is all covered before locking anything in.
Refix time is not a time to make a rush decision. If you start the process early – at least 60 days out from the fixed rate expiring, we have the best chance to get things sorted in time before the expiry date.
I can take care of all the legwork for you and negotiate on your behalf when it comes to getting the best deal out of the banks!
The best part of all is when it comes time to refix again in the future, I will remind you well in advance which makes a stress-less experience for all.
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.
