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The ins and out of refinancing mortgages & how to survive the process
Please note, this article does not constitute legal or financial advice and may not apply to your personal circumstances. Prior to entering into any transaction, we recommend that you seek legal and financial advice.
Many homeowners are faced with refixing their mortgage to a higher interest rate once their current rate expires. It is overwhelming going from an interest rate of 2.39% to refixing at 6 or 7%.
More than half of ANZ's mortgage holders have a loan at 2 or 3% that will soon end. This will constrain some households’ finances. You have a loan of $500,000.
The interest rate has increased from 2.49% to 6.49%. As a result, your monthly payments have increased from $1,973 to $3,157. You will need to pay an extra $1,184 per month towards your mortgage – almost $300 extra per week.
Refix vs. refinancing
In New Zealand, people often use two words when dealing with mortgages: refixing and refinancing. These words are important when you own a property.
What is refixing?
This is when you change the rules of your mortgage loan, usually when the fixed interest rate ends. You promise to stick with one lender for a set time and get a steady interest rate. Usually, this rate is lower than the one that changes. This is an opportunity to take advantage of lower interest rates but also to modify repayment structures or consolidate debt.
What is refinancing?
Refinancing means switching to a new lender. People do this to get lower interest rates, change how they pay back their loans or combine debts. Sometimes the new lender gives you money back to cover the cost of refinancing.
If you get a new mortgage, the lender will do some financial checks and procedures again. This includes checking the value of the property, your credit history, and the terms of the loan. The lender needs to assess the risk level in lending you the money – prior to approving the loan.
How can Property Lawyers help with refinancing?
Property Lawyers play an essential role in refinancing. Property lawyers help with changing the bank's name on a property's title.
They provide advice on the new loan terms. They manage the loan money from the new lender. They also repay the old lender.
Before making a big change like refinancing, it's smart to make sure everything else is in order too. Check that your Will, Powers of Attorney, Contracting Out Agreement, and any guarantees you made are all up to date. Check your personal insurance to make sure it covers you enough.
Once we receive the loan documents from your current lender, the process is as follows;
Step 1 - Discharge of mortgage
Current mortgagees are contacted to release documents on settlement and the repayment figure as of the settlement date is requested.
Step 2 - New mortgage/loan (if any)
We get new mortgage instructions from the bank. Then we check and prepare new mortgage papers for our meeting with you.
Step 3 – Cash contribution
You are informed of any cash contribution (if necessary) required before settlement,
Step 4 - Settlement
The mortgage advance is drawn down from your new bank or financial institution and the old lender repaid.
Step 5 - Registration
Your mortgage is cleared and/or replaced, and your payments are current.
Step 6 - Final report
Upon completion of the refinancing matter, you receive the final report detailing the steps we have taken on your behalf. Weston Ward & Lascelles is a law firm in Christchurch. Their lawyers are experienced in home transactions. They can assist you with buying, selling, or refinancing your home.
You don't need to worry or be stressed. We help you with everything from negotiating contracts to checking the property and transferring funds. We guide you through the whole process.
Contact our Christchurch property lawyers by calling 03 379 1740 or clicking here to send an enquiry.
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