Refixing or Remortgaging

Refixing and Remortgaging: What Is Right for You?

Recent reductions in home loan interest rates are welcome news for homeowners across New Zealand. However, these changes prompt an important question: how can homeowners make the most of lower rates?

Two common strategies to consider are refixing and remortgaging. Each option has distinct advantages and considerations. The appropriate choice depends on your financial objectives, the structure of your loan, and any potential costs such as break fees.

This article outlines the key features, benefits, and considerations of both options to assist you in determining which may best suit your circumstances.

Understanding Refixing

Refixing involves renewing the fixed interest rate on your existing mortgage with your current lender. This typically occurs at the end of a fixed term and allows homeowners to select a new fixed term, such as one, two, or five years.

Benefits of Refixing

Refixing is often regarded as the simpler and more convenient option for homeowners. Key benefits include:

  • A straightforward and efficient process that can often be completed online or by liaising directly with your current bank.

  • No additional costs associated with switching lenders, such as legal or registration fees.

  • The ability to secure certainty over repayments for a fixed period, providing greater financial predictability.

Considerations for Refixing

While refixing offers simplicity, homeowners should also evaluate:

  • Whether the rates offered by their current lender remain competitive within the wider market.

  • Any limitations on the mortgage, such as restrictions on making additional repayments or restructuring the loan.

  • Potential missed opportunities for incentives, such as cashback offers, which may be available from other lenders to attract new customers.

Understanding Remortgaging

Remortgaging, also referred to as refinancing, involves transferring your mortgage from your current lender to a different bank or financial institution. This option can provide access to more competitive rates, improved loan terms, or additional funds through equity release.

Reasons to Consider Remortgaging

Homeowners may choose to remortgage for a variety of reasons, including:

  • Securing a lower interest rate offered by another lender.

  • Increasing the loan amount to finance home renovations, investments, or other major expenses.

  • Consolidating multiple debts into a single mortgage to simplify financial management.

  • Accessing incentives provided by new lenders, such as cashback payments or reduced fees.

Potential Costs of Remortgaging

Although remortgaging may present financial benefits, it is important to be aware of potential costs, which can include:

  • Break fees if you exit a fixed term mortgage with your current lender before the term’s expiry.

  • Application and legal fees associated with establishing a new mortgage.

  • Registration costs and other administrative charges.

Choosing the Right Option

The decision to refix or remortgage should be informed by a careful assessment of your financial priorities and the potential costs and benefits of each option. Refixing may be preferable for those seeking minimal disruption and certainty, while remortgaging could be advantageous for homeowners aiming to reduce long-term interest costs or restructure their financial arrangements.

Professional advice can assist in navigating the complexities of either option. A lawyer experienced in property matters can review your existing mortgage terms, outline any legal implications, and guide you through the process, particularly where a change of lender is contemplated.

Contact the team at Turner Hopkins for more information. 

Next
Next

National Business Review