|For many people in NZ, home loans are the largest financial consideration they have, so it’s no surprise that with interest rates on the rise and ongoing COVID uncertainties, mortgage costs are top of mind for many.
But what is refinancing? What’s the benefit? And, do lower interest rates matter?
In this blog, we’ll look at how refinancing works and why now is an excellent time to consider your financial freedom and whether your home loan structure is still working for you.
What is refinancing?
Wikipedia states, “refinancing is the replacement of an existing debt obligation with another debt obligation under different terms”. Refinancing will usually involve moving from one home loan provider to another. At NZHL, we think of it as an opportunity for clients to reset in order to save on interest costs, reduce loan terms and receive better support and advice.
To refinance your mortgage, you will need to apply for a new loan that replaces your current one. At NZHL, we work with our clients to tailor a new home loan structure to best suit their needs and ensure the process is as streamlined and personal as possible. Think one to one meetings as opposed to a process focused on application forms!
When looking to refinance, there are also things to consider like the lifecycle of your loan, break fees (if any), and in some cases clawbacks for benefits provided. But that’s where NZHL’s personalised service comes in – we will work this through with you. During this process, it’s important to remember you could save more money long-term by refinancing; it all comes down to having the right structure!
Why are people refinancing now?
Right now, interest rates on mortgages are still relatively low. However, while they dropped significantly during 2020, they have recently begun to rise, and economists believe they will continue to do so.
So, while low-interest rates help reduce your interest costs (for now), there are also significant benefits to be had by utilising a smart home loan structure to reduce the interest you pay and therefore shorten the life of your loan. At NZHL, we believe the key to financial freedom is about focusing on what you can control, like your home loan structure and spending, as well as timely reviews, to ensure your structure is still working for you if your plans change. Essentially, we work with our clients to make the most of their mortgage, not the other way around!
Is my structure right for me?
Refinancing allows you the opportunity to see if you’re making the best use of your money. The key is coming up with a plan tailored to work for your personal circumstances – it’s all about setting up your surplus and understanding your goals.
Ultimately if your goal is to pay off your loan as quickly as possible, you may consider increasing your payment amounts – even $50 a week will help you get there quicker. However, if your goal is to add in an investment property or renovate your home, your advisor will need to consider the impact on your payment plan.
Remember, your mortgage structure should be tailored to meet your personal needs and goals – at NZHL, we call this our smart home loan structure. While we tailor it to suit the individual, essentially, it’s all about using your income and savings to offset the interest you pay, which can reduce the life of your loan in the long term.
What’s your next step?
As we’ve already said, now’s a very good time to consider your financial future and how NZHL can help you make the most of your mortgage. We’re 100% NZ owned, 100% passionately kiwi and are all about helping Kiwi’s achieve financial freedom faster with personalised service. If you want to see what could be possible for you, try out our NZ mortgage calculator, or get in touch with us directly to learn more. Lower rates are great, but they don’t shorten the life of your mortgage. Together, we can!
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