A Smart Guide to Refixing Your Mortgage Rate: Essential Steps for New Zealand Homeowners

Refixing your mortgage rate doesn’t have to be overwhelming. With a clear understanding and the right preparation, you can make decisions that positively impact your financial future. Here are five essential steps every borrower should take before locking in a new interest rate.

1. Stay Ahead of Your Fixed-Rate Expiry

In New Zealand, fixed-rate mortgages typically range between 6 months and 5 years. Knowing the exact expiry date of your fixed rate is crucial. Once it ends, your mortgage could shift to a variable rate, which might lead to fluctuating costs.

If you’re uncertain about your fixed-rate expiry, it’s a good idea to contact your mortgage provider. This will give you the opportunity to reassess your financial situation and explore your options, allowing you to make an informed decision without the pressure of time.

2. Align Your Financial Goals with Your Mortgage Strategy

Refixing your mortgage rate is a significant financial decision that requires careful consideration of your current and future financial goals. Ask yourself the following questions:

• Is your income stable, or are there potential changes on the horizon, such as unpaid leave or a career shift?
• Does your current mortgage term and repayment plan fit comfortably within your budget?
• Have there been any changes in your financial commitments or goals, like paying off debt, a salary increase, or starting a family?

Your financial landscape may have evolved since you first took out your mortgage. It’s essential to reassess whether your mortgage strategy still aligns with your goals. You might want to pay off your mortgage more quickly or reduce your monthly payments to free up cash for other priorities. Understanding your financial position will empower you to choose an interest rate that best supports your objectives.

3. Explore Your Interest Rate Options

Not all interest rates are created equal, and different lenders may offer terms that better suit your financial needs. When it’s time to refix, you’ll encounter several types of interest rates, including:

• Fixed Interest Rate: This option locks in your rate for another fixed term, providing stability and protection against rate hikes.
• Variable Interest Rate: Also known as a floating rate, this option fluctuates based on market conditions like changes to the Official Cash Rate (OCR).
• Blended Rate: Some lenders allow you to mix fixed and variable rates, or multiple fixed rates, giving you more control over how your loan is managed.

Taking the time to understand these options will help you choose the rate that best fits your financial situation and long-term goals.

4. Consider the Structure of Your Mortgage

Beyond the interest rate, the structure of your mortgage can significantly impact your finances. Here are some common mortgage structures to consider:

• Table Loan: This is the most traditional mortgage structure. Early payments mainly cover interest, while later payments reduce the principal amount. It’s a good option if you prefer predictable payments.
• Revolving Credit Mortgages: Ideal for those who manage their finances diligently, this structure allows you to borrow and repay funds as needed, up to a pre-approved limit. You only pay interest on the outstanding balance, which can save you money if managed correctly.

Each structure has its benefits and may align differently with your financial goals. Consulting with a financial adviser can help you choose the structure that best suits your needs.

5. Consult with a Mortgage Adviser

Refixing your mortgage rate is a critical decision that requires thorough research and understanding. A mortgage adviser can assess your current financial situation, discuss your objectives, and recommend the best mortgage structure and interest rate for your needs.

By taking these steps before refixing your mortgage rate in New Zealand, you’ll be better positioned to make an informed choice that supports your long-term financial health.

Whether you’re looking to secure lower repayments, pay off your mortgage faster, or simply ensure stability, a well-planned approach to refixing your mortgage rate will help you achieve your financial goals with confidence. If you’d like to get in touch with us (quickly and directly!) give us a call on 0800 005 676 today.