Reviewing or refinancing.
Staying ahead of the game.
The NZ economy never stands still, so it’s important to review your home loan regularly. You might discover a switch that will save thousands. Here are some tips on what to consider and a summary of how refinancing happens.
Understanding refinancing.
The first step is to understand what the term ‘refinancing’ means and how it’s different from other home loan changes, like refixing and restructuring.
What is refinancing?
Refinancing is when you get a completely new loan, usually with more favourable terms, and use it to repay your existing loan. This normally involves switching to a new lender. If you want to stay with your existing lender, you can usually restructure your existing loan rather than starting an entirely new loan.
What’s the difference between refixing, restructuring and refinancing?
Refixing is when you choose a new fixed interest rate term after your current one ends. So you’re just putting your loan, or part of it, onto a new fixed interest rate with the same lender.
Restructuring is when you change the way your loan is set up with your existing lender. It’s usually done when your fixed interest rate term comes to an end, so you don’t have to worry about early repayment penalties. Restructuring helps to ensure your loan is still well designed to support your needs and goals as your circumstances change in life. There are all sorts of possibilities, such as adding a small offsetting loan to the mix so your savings and everyday account balances help to reduce the interest you pay. Or you may need to extend the term of your home loan to reduce your minimum repayments for a while.
Refinancing, as we mentioned above, is replacing your loan with a completely new one, usually with another lender. Refinancing often includes some refixing and restructuring, as you set up the new loan to best suit your needs.
Why refinance your home?
The main reason people refinance with a new lender is to get a better deal than their current lender is prepared to offer. There are many things that might make one lender’s offer better than another’s for your situation. Even if you’re just thinking of restructuring a loan with your current lender, it’s often a good time to at least check what their competitors would offer.Better interest rates
These are constantly changing. If you’ve been keeping an eye on rates, you may have noticed another lender seems to consistently offer lower rates than your current one does. Even a slightly lower rate can make a big difference to what you pay over the life of the loan and how soon you can be mortgage free. Our handy rates table makes it easy to compare the latest interest rates.A more suitable loan product
While most lenders offer similar loan options, there are differences between them. You may find another lender can offer a type of loan that better suits your needs in the way it works or the opportunities it provides. For example, if you have a variable income, another lender might make it easier to increase your loan repayments online and bring them back to the agreed minimum again whenever it suits. Or you might have realised an offsetting loan would save you money, but your current lender doesn’t offer them. To learn more, see our guide about types of loans.More favourable lending conditions
Each lender has their own rules on how much they’ll lend, when things like a low deposit (low equity) interest rate margin will be charged or whether mortgage insurance is compulsory. If another lender offers better conditions, it could be worth switching. For more, see our guide about low deposit home loans.A much-needed new customer incentive
Lenders sometimes offer bonuses to attract new customers. These range from substantial cashback payments and new appliances to paying for a house valuation or your legal expenses. Just keep in mind that some have to be paid back if you take your loan elsewhere within a certain time. If you received an incentive when you first signed up with your current lender, be sure to check whether it has to be repaid if you switch to someone else. You’ll find more detail in our article about home loan cashbacks.Better customer service
If your current lender has let you down a few times, you might want to jump ship to a new lender. This can seem particularly attractive if you have friends or family who rave about their lender, whenever you complain about yours. Just be sure to fully research the immediate costs and ongoing differences in interest rates and fees.When to refinance
You can refinance your home whenever it suits, but there are times when the costs involved will be less and the benefits may be greater. A loan review, with refinancing included as a potential option, is something you should do on a regular basis. Interest rates, lenders’ offers and your own situation will inevitably change with time. It’s important to ensure you still have the best possible loan arrangement. Here are some common examples of when it might be good to refinance your home.
Your fixed interest rate term is coming to an end
If you repay a loan while it’s still on a fixed interest rate, you’ll probably have to pay an early repayment charge (see below). So waiting until the fixed rate is about to end, and planning ahead for when it does, can make good sense. Your lender will probably let you know it’s coming to an end and suggest you lock in a new fixed interest rate in advance, often with some urgency. They’ll also explain that if you do nothing it will roll onto the floating rate. While your current lender may still be offering the best loan for your situation, now’s a good time to check. Even if it rolls onto a higher floating rate for a brief period, you can always refix it as soon as you’re sure. For tips on what to do when a fixed rate term is coming to an end see our guide to managing your home loan.
You’re struggling to meet your home loan repayments
If you think you won’t have the money for an upcoming home loan repayment it’s important to contact your lender as soon as possible. Several options may be available, such as a short repayment holiday or restructuring to an interest-only home loan for a while. Another option may be to reduce your regular repayments by spreading them out over a longer term of up to 30 years. Just bear in mind this will increase the total interest you pay over the life of the loan. If your current lender can’t offer an option that meets your immediate or ongoing needs, you can always consider refinancing with another lender.
A major change in life is coming up
Life events can impact the type of home loan you need. You might need more flexibility or you might want to remove the temptation flexibility provides. Either way, restructuring your loan with your existing lender can help. At the same time you can check out what other lenders would offer if you refinance with them. If you’re in a personal relationship that’s coming to an end, see our article about refinancing your home after a breakup or divorce.
You need to cash up some of the equity in your property
Urgent repairs, an addition for your growing family, a more reliable car or an overseas trip to see family. These are events that suggest it’s better to borrow the money needed rather than wait. If you’ve repaid some of your home loan or your property has increased in value, you may be able to increase your loan to provide the cash you require. You’ll need to meet the repayment affordability criteria of course. It’s also a good time to review the structure of your loan and keep refinancing with another lender in mind.
Your income has increased or you’ve received a substantial sum
Whenever your finances change significantly, it’s important to get independent professional advice before deciding what to do. For most people, repaying their home loan faster will create significant long-term benefits. But it also pays to plan ahead and allow for upcoming life events and goals. This can involve restructuring your loan or switching to a lender who’s offering a better deal. For more, see our guide to repaying your home loan faster.
Refinancing costs.
There are usually costs involved in refinancing with another lender and it’s important to take these into account. A new lender might offer to help cover some of the costs, so be sure to ask and negotiate. In the meantime, here are some of the most common refinancing expenses.
Break fees
Also known as early repayment charges, these occur if you repay a fixed interest rate loan before the fixed rate contract ends. The lender apply these charges to recover their costs and lost income. If interest rates have increased they’ll be able to re-lend your amount owing without loss, so the fee will cover admin costs only. But if rates are now lower, the fixed rate term has a while to go and there’s still a lot owing, the break fee can be substantial. For more see our article on breaking a fixed home loan.
Legal fees
When you refinance with another lender, it’s like getting a completely new loan. Typically, you need to pay a lawyer to process the documentation and ensure mortgages over the property are released from your current lender to your new one. Some lawyers specialise in providing this service at more affordable rates, so shop around.
Valuation fees
Your new lender may ask you to provide a current registered valuation of your property. These usually cost at least $500.
Repaying rewards or incentives
If you received a cashback incentive or other rewards when you got your current home loan, you’ll probably have to pay it back if you’re switching within a certain time. It’s usually two or three years, but each agreement is different.
Documentation fees
A new lender may charge a set up or establishment fee of about $150 for a straightforward home ownership arrangement. You can often negotiate to have this fee waived. In addition, your current lender will probably charge fees related to repaying and discharging the loan. These are typically around $40 for a standard set up.
Consulting an adviser.
If you’re thinking about refinancing, a mortgage adviser (broker) can help you find the best deal for your situation. They’re paid by the lender you choose to switch to, so there’s usually no extra cost to you, but be sure to ask upfront. They’ll start by getting to know your situation and goals before recommending the best options and explaining each one to you. Here are some of the ways a mortgage adviser might help.
Market knowledge
A good adviser works closely with multiple lenders. This means they should have detailed knowledge of the latest offers and each lender’s rules and criteria. Sometimes they can access interest rates that are better than those publicly advertised.
Product knowledge
Advisers work with home loans every day, so they can help you work out the cost benefits of switching for each option that might suit your needs. This not only saves you time, it gives you peace of mind knowing you haven’t missed an important detail.
Application support
Once you’ve chosen a new home loan provider, a good adviser will help you prepare all the application documents. This ensures you’re represented in the best possible way and the application is processed without delay. Refinancing is like getting a completely new loan, so there can be a lot involved around providing evidence of affordability and so on.
Ensuring the refinancing process happens smoothly
Even after your new loan is approved, a good mortgage adviser will stay with you every step of the way. As you progress to drawing down your new loan, they’ll make sure everything happens as it should and help put things right if there’s a problem.
To learn more, see our article why work with a mortgage adviser for refinancing.
How to refinance, step-by-step.
Here’s a step-by-step summary of a typical process for refinancing your home, with or without the help of a mortgage adviser.
1. Be clear about why you want to refinance
It’s important to carefully consider what you’re trying to achieve. This might include your immediate needs and longer term goals. Writing these down and referring back to them when making decisions can help you stay on track. When you consider the facts, simply restructuring things with your current lender might turn out to be the best option.
2. Research your actual costs to refinance
Everyone’s situation is different, so ask your current lender for a list of the costs to break and discharge your loan, including any clawback on customer incentives. Talk to a lawyer about conveyancing charges and find out what a typical valuation costs in your area.
3. Research other lenders’ offers
You may already have a good idea of published interest rates, but there’s more to explore than that. Lenders with the lowest interest rates might have challenging acceptance criteria, a limited range of loan types or no incentives (like a cashback). The quick way to do this is to work with a mortgage adviser.
4. Talk to your current lender
It’s usually a good idea to let your current lender know you’re considering switching and why. You might be surprised by what they’ll offer to keep your business. If you’re using an adviser, it can be helpful if your current lender is one they usually work with.
5. Apply for your new home loan
If you’ve decided that refinancing will best suit your needs, it’s time to apply to your new lender. Once they’ve given you some indication that you might be approved, you can get a formal application together. This can involve considerable paperwork and financial evidence, like bank statements, records of savings and other loans, proof of income and a property valuation.
6. Home Loan approval and drawdown
If your application is approved, the new lender will send you a letter of approval that includes all the details of the loan. If you accept this, they’ll set you up as a new customer, which requires proof of ID and so on. They’ll send the full loan documentation to your lawyer for you to work through together, sign and return. On the agreed drawdown date your lawyer will make sure your previous mortgage is repaid and discharged, and the new mortgage is registered on your property’s title.
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Home refinancing FAQs.
If you’re thinking about refinancing your home, you probably have a bunch of questions in mind and will think of more as you consider your options. Everyone’s situation is different, so the best person to help you is a trusted financial adviser or mortgage broker. In the meantime, here are answers to commonly asked questions about refinancing.
What is mortgage refinancing?
Why would someone refinance their mortgage?
Does refinancing mean you get more money?
What is mortgage refinancing?
Why would someone refinance their mortgage?
Does refinancing mean you get more money?
How much money do you need to refinance?
When should you not refinance?
How often should you consider refinancing a property?
How much money do you need to refinance?
When should you not refinance?
How often should you consider refinancing a property?
Many mortgage advisers recommend an annual review. The idea is to check whether your financial situation and goals are still the same, and whether you still have the best interest rates and loan structure for your needs. Even if they’re not ideal, you may just need to restructure your loan with your current lender, rather than refinancing with a new one. The point is, it pays to check regularly and plan ahead.
Essential reading for refinancers.

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When to refinance your mortgage?
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Check out the latest home loan rates.

Helpful calculators.
Refinancing your home or a rental property often begins with a review of what you could afford. This helps you get the balance right between repaying your loan quickly and ending up in financial trouble because you over-reached. Our handy calculators make it easy to plan a budget, check your borrowing power and explore the repayments on various loan structures.
Get an estimate of what your repayments could be, based on your mortgage amount, term and interest rate.