Most Kiwis like to set and forget their home loan. They ﬁx the rate for a period of time and take comfort knowing how much they pay each month. However, you could potentially save thousands of dollars by refixing or reﬁnancing. Take the time to sit down with a mortgage broker, work out your options and see if there are savings to be made. What have you got to lose?
Most banks offer varying cash incentives to help entice customers to reﬁnance their mortgage and change providers. In some cases these incentives can be big enough to cover the costs of breaking your loan agreement and any legal fees, while still leaving cash in your hand. So not only might your mortgage broker get you a better rate, but refinancing might get you a little cash back as well.
Dictate the terms when re-ﬁxing
When any ﬁxed rate mortgage is coming to the end of the ﬁxed rate term, your bank will try to determine your new rate. Often a mortgage broker can negotiate a better ﬁxed rate on your behalf, and because they'll understand your ﬁnancial goals better than your bank, they’ll work towards getting the deal that best suits your needs.
To fix or not to fix?
While having a ﬁxed interest rate and ﬁxed monthly repayment is great for your peace of mind, there are some disadvantages. Fixed rate home loans often have less ﬂexibility than a variable rate loan arrangement. You may be restricted from making extra repayments and, if the interest rate falls, you will miss any incremental savings.
For those still sitting on the fence, it’s well worth considering a combination and splitting your home loan. This type of arrangement allows a portion of your loan to be paid at a ﬁxed rate and the remainder paid at a variable rate. This will give you some reassurance in knowing roughly how much you will need to pay each month, as well as enabling you to take advantage of ﬁnancial savings if interest rates fall. If interest rates rise, you’re also protected as only part of your loan is affected.
As with all such decisions, it makes sense to speak with an expert. So if you’re thinking about reviewing or switching from your current loan provider, discuss all your options with a Mike Pero Adviser today.