Refinancing Your Mortgage: Six Tips

9 April, 2017 | Jennifer Edwards

Here are some practical tips for calculating whether refinancing to a new bank or within your current bank is best for you.

Break Costs

What are the break costs? Break costs are the fees your bank may charge if you pay off a loan earlier than the term it is fixed for. If your current mortgage is on a fixed interest rate (as a opposed to a floating interest rate), it is likely you will incur break costs. Your bank will be able to give you an estimate of the break costs. You should take the break costs into consideration when calculating if refinancing is in your best interests. You may be able to get your new bank or even your existing bank to cover the break fees.

Mortgage brokers

Utilise a mortgage broker. Often mortgage brokers can source the best interest rates for you from a variety of banks. Once you have an offer from a new bank you can then do some calculations.

Repayments

Most banks have a mortgage calculator on their website. Once you have an estimate of your break costs, add them to your current debt and make use of the calculators. You will then be able to estimate how much you could be paying on a new loan at a different interest rate or longer term.

Existing bank

Negotiate with your current bank. You current bank won’t approach you to refinance to a lower rate, but if they know you are thinking of switching banks they might offer you a competitive rate so you continue banking with them. If you are refinancing with your existing bank you should not need a lawyer.

New bank

If you decide that moving to a new bank is the best option for you, ask them how much they will contribute to your legal costs for the refinance. If you are refinancing from your existing bank to a new bank you will need a lawyer to complete the process.

Notify your lawyer

You should notify your lawyer of your intention to refinance as soon as possible and let the bank (or mortgage broker) know the name of the law firm, their email address, postal address and phone number.

What the lawyer does

If you are switching banks the lawyer will need to arrange for a discharge of your current mortgage. Your new bank will prepare and sent to your lawyer the loan and mortgage instructions. You will need to meet with your lawyer for them to explain all the loan documents to you, and for you to sign all the paperwork to complete the refinancing.

Are you looking to refinance? Give Jennifer Edwards a call today to get started with your refinancing. Phone: 09 837 6889  Email: jennifer.edwards@smithpartners.co.nz
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