REFINANCING: DON’T SETTLE FOR ADVERTISED RATES

Comparison websites will tell you which banks have the lowest fixed term mortgage rates for each period and outline your potential mortgage savings. These comparisons can be misleading. From our experience, interest rates are negotiable – advertised mortgage rates are simply a starting point. If you’re looking to purchase or refinance, don’t just settle for the advertised mortgage rates. We highly recommend you seek the assistance of a mortgage broker and see what is truly on offer.

Benefits of Refinancing

Lower than Advertised Rates

As reported by Stuff, banks are becoming increasingly competitive in order to capture additional mortgage business. The reduction in the volume of house sales has led to them needing to find new customers elsewhere. Consequently, banks are offering lower than advertised mortgage rates to entice customers to switch.

The Stuff article used BNZ as one example, but, from our experience, multiple banks offer far below their advertised rates. As of February 2023, BNZ’s advertised 1-year fixed term rates were 6.45%, but they were offering rates as low as 4.99% per annum on a one-year fixed term to entice new customers. Other banks will also be competing for business. Borrowers can be in a good bargaining position when their fixed rate term expires, or they are otherwise on a floating rate.  At that point, they can refinance with another bank without incurring any penalties, and banks are increasingly desperate to meet their sales targets.

Cash Contribution

Banks will also offer a percentage of the loan as “cash back” and, if you remain with them for the specified period, this money is yours to keep. We have seen cash contribution rates of up to 1%. On a mortgage of $900,000, this could mean up to $9000 cash.

What to Know

When considering refinancing you need to consider:

• The terms of your last cash contribution.
• When your fixed-term interest rate expires (or expired)?
• If still on a fixed rate, what are the break fees?
• If you used a mortgage broker when you obtained finance, what were the brokers terms?

Mortgage Brokers

Banks pay Mortgage Brokers commission for bringing in new customers. This is why you usually don’t pay a fee to the broker directly. But be aware that you are usually “locked in” to that mortgage for a set period of time.  Also, there are cases when a broker may charge you a fee for their services – so it is important that you always check their terms prior to refinancing to ensure there are no unexpected costs.

If you are looking for a mortgage broker, please see our list of recommendations here.

Conclusion

Refinancing could save you thousands of dollars, and with the right cash contribution, it could essentially make changing banks free – as the contribution will usually far exceed legal costs depending on your current mortgage balance. If you’re considering refinancing, contact the friendly team at Wakefields Lawyers today on (04) 970 3600 or email info@wakefieldslaw.com.

– Tom Speight (Solicitor)