Why Do People Refinance Their Mortgage in New Zealand?
With interest rates in New Zealand currently lower than they were previously, many homeowners are starting to come off fixed rates that were set when rates were higher.
If your mortgage is coming up for renewal in the next 3–6 months, this can be a good time to review your options.
When a fixed term ends, most people simply refix their mortgage with the same bank. However, this can also be a good time to review your mortgage and consider whether refinancing or another option could be beneficial.
A mortgage review is where we look at your current mortgage, your financial situation, your goals, and your future plans, and then compare different options to see what the best pathway for your mortgage is. This will typically involve looking at whether refixing, refinancing, or restructuring your mortgage would be the most suitable option.
What Are the Benefits of Refinancing?
People refinance their mortgage for a range of different reasons. In many cases, it’s not just one factor, but a combination of things that makes refinancing worthwhile.
Restructuring the Mortgage and Exploring Different Loan Products
One reason people refinance is to restructure their mortgage so it better suits their current situation.
Not every bank offers the same mortgage products or lending structures. By reviewing options across different lenders, it may be possible to structure a loan in a way that provides more flexibility or better aligns with your goals.
This could include things like introducing revolving credit or offset facilities or splitting the mortgage across different fixed terms. Small changes to the structure of a mortgage can sometimes make a significant difference in how the loan works over time.
Reviewing Interest Rate Options
Interest rates are always changing, which is why many homeowners review their mortgage when their fixed rate is coming to an end.
Refinancing provides an opportunity to look at what different lenders are currently offering and compare the available options. While interest rates are only one part of the overall mortgage structure, they are still an important factor to consider.
Cashback Offers
When homeowners refinance their mortgage to a new lender, banks in New Zealand will often offer cashback incentives.
This is typically offered as a percentage of the loan amount and is paid when the new mortgage settles. The amount can vary depending on the bank and what they are currently offering at the time.
Because refinancing involves taking out a new loan with a new lender, this can mean receiving a new cashback offer as part of the process.
Accessing Equity for Renovations or Other Projects
Another common reason people refinance is to incorporate a top-up at the same time.
This can be used for things such as renovations, accessing equity to purchase another property, buying a vehicle, or funding other large expenses.
A Real Example
For example, a couple who had a $700,000 mortgage and were planning to renovate their home.
They wanted to access additional funds for the renovation while also reviewing whether their mortgage structure still suited their situation.
By refinancing their mortgage, they were able to arrange a $50,000 top-up for the renovation, bringing their total lending to $750,000. At the same time, we restructured their mortgage so it was set up in a way that better suited their plans.
As part of the refinance, the new lender also offered a 0.9% cashback based on the total loan amount.
In this case, 0.9% of $750,000 was $6,750, which was paid after the loan settled.
This gave them funds they could use towards their renovation costs while also improving how their mortgage was structured moving forward.
Reviewing Your Options
If your mortgage is coming up for renewal, it can be a good opportunity to take a step back and review how your loan is structured and whether it still suits your situation.
A mortgage review allows us to look at your current lending, talk through your goals, and explore whether refinancing, restructuring your mortgage, or simply refixing with your current lender would be the best option for you.
The goal is to make sure your mortgage is set up in a way that works well for your plans both now and in the future.
If you'd like to review your options, you’re welcome to get in touch to organise a mortgage review discussion.
