Mortgage Restructure
Most Kiwis start with a 25 or 30-year mortgage. At any point during this term, you are able to 'payback' the mortgage by getting a new mortgage. When you get a new mortgage it is an opportunity to restructure all of your lending - perhaps extending terms, changing account types ie incorporating offset accounts, or to top up your lending to pay for an additional house deposit, a holiday or combining high-interest personal debt. This is often referred to as ‘refinancing’ if it involves changing lenders.
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What is refixing my mortgage?

When your fixed rate term comes up for renewal you can refix for another fixed rate interest rate term. The other option is to break your fixed rate term, to refix.

What is refinancing my mortgage?

It is when you move your mortgage from one bank to another, re-negotiating the terms of the loan in the process. You can either refinance during your fixed rate term, paying break fees in the process, or you can wait until your fixed rate term finishes and then refinance without break fees. There are three common reasons for refinancing; debt consolidation – where you can roll high-interest debts into your low-interest mortgage, to access more lending, or to save money.

Is refinancing going to save you money?

We only ever recommend refinancing if your own bank is unwilling or unable to come to the party and meet your rate expectations and/or new lending requirements and LVR levels. When assessing whether refinancing is going to save you money, it’s important to consider the financial costs involved, as well as the time commitment required. But ultimately yes it will save you money – or we wouldn’t suggest it as an option. The spreadsheets provided will help you understand the numbers so you can make decisions based on costs and savings.

Step 1: We’ll approach your own bank for their most competitive rates and cash retention offer (getting cashback should not drive your decision making process and is not common from your existing bank). We will assess if you can restructure with relative ease and get the products and loan terms you want and need.

If this is in line with your expectations, great! No need to refinance ( or swap banks). We’ll help you review your loan structure. At any one time we’ll have multiple applications with each bank across New Zealand, for many different clients, so we have a good feel for what rates you should be able to expect. We will not submit your application to multiple lenders without a good reason to do so. 

Sometimes your existing bank will be unwilling to compete for your business or their internal way of assessing applications just will not work for you. We often find banks are eager to please their new clients and the feedback is that their existing clients sometimes feel let down by the service. If your bank is unwilling to negotiate, or unable to accommodate you because you don’t meet their lending requirements, we’ll be able to help you assess other options with New Zealand’s most competitive banks.

Step 2: Before proceeding, we’ll assess the costs involved, and make sure the benefits outweigh the costs.

Refinancing usually involves a solicitor to prepare the new mortgage, and potentially paying some break fees to the bank if you have a fixed mortgage rate. We’ll add these costs into the calculation so you can see the net benefit. We can give you a 95-100% accurate representation of the end result long before you’ll need to produce a full application, without running credit checks, if you shop around yourself the credit checks will probably occur.

Generally, when figuring out whether or not it’s worthwhile to refinance, you need to calculate the difference between the interest rate you are currently paying, and the interest you would be paying on your new, lower interest rate mortgage. This interest saving, combined with a negotiated cash-back offer from the bank, will show you the total savings. After subtracting the costs involved, you’ll find your net benefit from refinancing. The money aspect is only one factor. Our advisers will help you understand financial goals and challenges and focus on getting you past any frustrations currently setting you back or those likely to arise in the near future (like interest-only expiry or secondary debts at higher rates).

Can I refinance without changing bank?

Yes! Technically it’s not a refinance, and would most likely just be a restructure of the debt. The benefit of restructuring with your existing bank is that you won’t need to open any new accounts. It’s likely you will still need to do a full application, and also may need to get a solicitor involved if new mortgage documents need to be signed. It’s best to speak with your Mortgage Adviser to get a better understanding of which will be the best option for you.

The downside of staying with your existing bank when doing a restructure is that you’re unlikely to get the bank’s most competitive lending offer, as they usually reserve these for new clients. Many clients change banks for new banking products, new access to lending not available at their current bank, or dissatisfaction with the service. If you like your bank then staying there makes sense if they allow you to do what you want (within reason). 

Mortgage Topups

Using your home equity, you can top up your mortgage to pay for things like credit card debts, GEM Visa debts, Q Cards, holidays, cars, boats, jewellery, and the list goes on. If you have debts or planned future expenses and you’d like to put this on your home and make it so that payments are lumped in with your mortgage payments then you need to apply for a top up. You may only want $10,000 or $25,000… or you may want $100,000+ for a bunch of different things.

You may also do this for renovations, extensions, and to build up a revolving credit to allow for a deposit on another property.

The process is simple enough. Firstly, you need to have enough home equity to do this.

That means your home loan has to be 80% or less of the current home value by at least the amount you want to top up. Let’s look at an example. Assuming your house is worth $960,000 and your mortgage is $568,000. You take 80% of $960,000 which is $768,000 and minus your mortgage to show your usable equity.

Here is the equation:

Home Value multiplied by 80%, minus the mortgage

= Usable Equity

$960,000 x 0.80 (80%) = $768,000

– $568,000

= $200,000 (Usable Equity and Potential Maximum Top Up)

So you’ve worked out your usable home equity, now we need to see if your bank, or any bank for that matter, is going to let you max out your lending on this property. Said in another way – will the bank let you extend your mortgage from $568,000 to $768,000. This is usually going to be dependent on your income. There are a variety of more complex equations done behind closed doors called ‘servicing’ or ‘serviceability’ calculations. A mortgage adviser or banker needs to see if your income can cover the addition of new debt (the $200,000). Now if you only want a small topup it is likely going to be fine unless you’ve had major changes to your income since you first got your mortgage or you’ve had some ‘bad account conduct’ which means you’ve missed mortgage/debt payments recently.

If you would like to chat about a mortgage top-up then fill in the details in your online profile or give us a call. Working out usable home equity when you have lots of properties is a little more complicated and we’ll need more info for that. Mortgage Advisers are client focused and try to deliver so much value it’s a no-brainer to choose us as your go-to people for support on mortgage and loan top ups and applications. It is free and there are no obligations.

Refinance Summary

Would you like an analysis of your options to see if refinancing onto lower interest rates or separating securities is worth the effort financially?

mortgagehq can look at your spreadsheets or online profile (complete the 10min form) and assess if you would benefit from switching any of your loans to interest only or principal and interest and if you should consider switching banks. Remember, we help people refix and refinance all day every day, we see things you may have missed or do not yet fully understand. Let us help you see where the numbers reveal your best strategy.

See below for an example.

Now you may have a spreadsheet that has rental and property info on it, this will be helpful in our mortgage audit.

All your information will remain private and will not be shared. There are no costs or obligations.

Interest-only Mortgages

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