Is there any reason why you would consider transferring your mortgage to another bank? It seems a somewhat unnecessary and stressful endeavour. Many New Zealanders run a mile from awkward conversations with the bank manager and it’s not hard to see why. When you transfer your mortgage to another bank you are doing what is called a mortgage refinance (read this to find out about why you would refinance, or continue to look at the more practical aspects of transferring your mortgage).
But there are a few very good reasons why you might consider doing so after all the bank that gave you your mortgage may not be the right bank for your current situation. The good news is, it’s actually incredibly easy to change your mortgage lender as well!
When you were buying your first home hopefully you talked to a mortgage broker or at least shopped around and picked the bank that best suited your needs then. You probably signed up for a 25 or 30-year term… but this isn’t an unbreakable contract. You are welcome to move your mortgage to another bank at any time.
Let’s have a look at some of the reasons why people generally change their home loan provider.
If, after reading this, you’re left mulling over such a decision, then get in touch with us here at mortgagehq for a quick chat. We can not only put you in touch with the right people to make the process as easy and seamless as possible, we can also provide you with spreadsheets detailing potential savings and switching costs.
It is not uncommon to change a mortgage provider.
With different banks offering lower mortgage rates or a host of unique incentives that suit different people’s situations, there’s no wonder that you may desire to switch home loan providers.
The one catch is that there are usually hefty break fees and administration fees which often outweigh the benefits of changing mortgage lenders.
By speaking with a mortgage advisor who has detailed information regarding a range of different bank’s policies and plenty of spreadsheets to sum up the risks and benefits, you can make the best informed decision for your unique circumstances.
How do people benefit from mortgage switch deals.
One of the usual reasons why we see people transferring their mortgage to another bank is because they are looking to either increase or reduce their repayment amounts and end up changing banks whilst doing this.
By moving your mortgage to another bank and lengthening your repayment years, you will benefit from a reduced monthly or weekly payment amount.
By moving your mortgage to another bank and shortening the number of years you need to repay your loan to get rid of your mortgage faster by paying more each time. Counterintuitively this is not always the best way to get mortgage-free faster it’s best to discuss this plan with your adviser before getting locked into higher repayments.
Banks, like any other business, compete with one another constantly. They offer their customers the best deals so that they can maintain your loyalty. Take the time to keep your eyes and ears open to any promotions that would financially benefit you whilst considering whether the time is right to leap at the chance to pursue some additional personal goals.
We can help you to decide whether it would be advantageous for you to restructure your loan and move it to another bank to benefit from certain offers.
Restructuring your loan for personal reasons is usually why you would consider moving your mortgage to another bank. These personal reasons are varied, but generally offer you an advantage in doing so.
Some reasons include but are not limited to:
- Fixed interest rate term is ending
- Lower mortgage interest rates with another bank
- Top up for unexpected costs
- Holiday or necessary travel expenses
- Renovations to existing property
- Property investment. Note that some banks will be easier to borrow more
- Debt consolidation
- Not happy with service from existing bank
- Bank products that suit your needs and goals
- Separate securities
- Change details (for example from personal names to LTC or trust)
- Cash back schemes
Although banks often appear identical on the surface, they are all very different. Each bank has unique lending policies, and their own mortgage calculators will provide you with wildly different options. In addition to internal policy differences they use different property valuation techniques – sometimes a switch to a new bank can move you out of low equity penalty rates or let you access enough equity to buy an investment property.
By shopping around, you can enjoy the best mortgage transfer deals currently available. You can do more with the equity that you have in your home.
A mortgage transfer to another bank could help someone else.
If it makes no difference to you, but it can help your children or other family and friends, then you may consider switching to another bank for your home loan.
It may be that by changing to a mortgage lender that offers a particular service or has terms and conditions that are more favourable, you are supporting another person with their home ownership goals.
There is no detrimental impact in taking advantage of favourable situations for others by transferring your home loan to another bank. Although again, we do stress that you have considered all of the break fees and additional costs involved. We want you to make an informed decision.
We know that some of you are happy to take a small financial hit to enable others the opportunity to seek out financial freedom in the future. By weighing up the costs and the benefits, we can help you to see whether a move to another bank will be the right decision.
How easy is moving your mortgage to another bank?
Of course a bank that you are considering switching to will make it as easy as possible to move with them. Many banks simply require proof of income, details of debts and expenses and some form of ID.
If you’re buying property whilst switching, then additional information such as a registered valuation, proof of deposit and other sales agreement documents will be required as well.
Moving away from your existing bank tends to be where complications lie, although with appropriate support this too can be a seamless and stress free process.
Recognise that you will incur a break fee for ending the terms of your contract with your current bank prior to the agreement being due to end. Additional legal fees should be expected as well, to go through the finer details of this.
Some fees may be waived through the agreement with your new bank and by working with a mortgage advisor, we can point you in the right direction to cut as many costs as possible.
What do I need to look out for when switching mortgage lenders?
Transparency can be difficult, and mortgages are daunting agreements that are discussing large sums of money. Don’t get swept up too quickly in deciding whether to change your mortgage to another bank. Put aside a couple of weeks at least to do the necessary research that is involved.
Legal costs and time as well as mortgage transfer fees are financial implications that can be obvious detractors to the idea.
Whilst incentives such as lower interest rates, more options, improved service and cashback offers encourage the decision to change home loan providers.
An impartial mortgage advisor is going to have far more insight into what you should do as opposed to a banker. A banker, although with deep knowledge on their products and services, has a narrow vision regarding other available services.
They are unable to provide you with all the information you need to make the decision to transfer your mortgage to another bank.
What is best for you might be to switch banks for an alternative bank product. Or to get that debt consolidation that you need to achieve your financial goals. You may be desperate to help your children into a home of their own and be unaware that by changing to a bank that offers a certain service, you can help them to achieve this.
It is good to assess whether you are able to get what you want to get done at your current bank. But if you want to get the best outcome financially, it does make sense to consider whether you should transfer your mortgage by speaking with a mortgage adviser. We can lay out your options in black and white for you to make sense of.
That way, you can compare the benefits you will receive with the costs you will likely incur. Through this, we will help you to understand that transferring your home loan to another bank is easy, and can also save you money in the short term and long run!
Get in touch with us to discuss your goals so that we can help you put you on the right path to achieve them.