How to refinance
your mortgage

“Remortgaging” or “refinancing” is when you replace your current mortgage with a new one with different (hopefully better) terms. You can work with your current lender or bank, or you can switch your loan to another lender if they have a better deal for you.

Refinancing is often part and parcel of owning a home. It can be an opportunity to pay less in interest and finish off your mortgage more quickly. For many it’s about financing their lifestyle or consolidating debt, too.

In addition to saving on interest, there are many reasons you might be looking to refinance:In addition to saving on interest, there are many reasons you might be looking to refinance:

• Your level of income has changed
• Your situation has changed due to illness or redundancy
• Your expenses have changed, for example, if children have left home
• You may want to access a lump sum for renovations or medical treatment
• You want to consolidate your debts
• A windfall has come in, such as a bonus or inheritance, allowing you to make a larger repayment on your mortgage. 

If you’re reading this and interest rates have been falling, you could grab a much better deal if you refinance. Your bank won’t automatically offer you the better deal – you need to shop around on sites like interest.co.nz and moneyhub.co.nz and then take the initiative to refinance.

This will depend on how the terms on your current mortgage compare with your refinanced loan. To get an idea, fire up our mortgage calculator and plug in the interest rate and the length of the loan.

Saving $200 may not sound that significant when compared with a mortgage worth hundreds of thousands. But $200 every month over many months, could definitely be worth it. Take into account how long you expect to hold the mortgage.

More importantly, if you refinance and keep your current repayments as they are, how much could you save in interest? That will be worth much more, so enter your details into our mortgage calculator to get a view.

The key when deciding whether to refinance is to determine whether it is worth it. The only way to see that is by including all the costs involved and comparing them with the benefits you’re getting.

Only your current lender is able to show you the exact figures. If you are on a fixed rate mortgage and considering breaking your contract, ask your bank to email your break fee.

It’s important to take account of all the costs involved, and there can be additional fees when switching to a new bank as well. These costs include:

• Break fees
• Repayment of cash incentives
• Exit or discharge fees
• Solicitor fees to get the mortgage changed
• New valuations
• Application fees

Lenders will check your credit history when you apply to refinance, so it’s good to know your credit score and see a recent report. Find out about who holds your credit details and how to get a free copy of your credit report.

When you apply too often for a mortgage or credit in general, it can drive down your credit rating. When you are shopping around for the best rate to refinance, different lenders will run your credit history.

So how to keep this from affecting your score? Do all your rate shopping within two or three weeks, so all your credit enquiries are treated as a single application instead of many.

Your credit history can also be affected negatively when you take out cash as part of a refinance arrangement.

Yes. Just as when you apply the first time for a mortgage, you apply and qualify for a remortgage. And you can be turned down.

Wrapping all your debts together and paying them off all at once by refinancing can be helpful. With a lower interest rate you can save a lot.

But it also depends how quickly you pay it off: if whacking it on the mortgage keeps it around for longer, it’s not as helpful or as cheap.

Debt consolidation can even lead to more debt if we’re not careful, such as when we end up with empty credit cards that can be run up all over again. The goal is to become debt-free, after all.

Here are some other strategies for paying down debt.

You’ve got a range of options available when you remake your mortgage, with various degrees of flexibility and different repayment structures. Find out more about the different mortgage options out there.