When refinancing your mortgage, comparing offers from different banks is smart. But what happens when multiple offers look almost identical?
We asked Aseem Agarwal, Head of Mortgages at Global Finance for advice on refinancing and what to do when multiple offers appear the same. He responded by telling us that there are more factors than interest rates to consider before making your choice.
I asked Aseem to elaborate. He said, “Yes, a low interest rate is essential, but it’s not the only thing to consider. Some banks offer a slightly lower rate but charge higher fees or have stricter conditions”.
The best move, he told us, is to pick the lender that offers more than just a good rate & cashback and to choose one that supports your overall financial well-being. And the best way to do that, he said, is by making use of experienced experts.
No more guesswork
Aseem recommended working with a mortgage broker because doing so takes the guesswork out of the refinancing decision. The experience, connections, advice, support and market knowledge that mortgage brokers have will give you the confidence to know you have chosen the best refinancing option for you.
This blog outlines how mortgage brokers look past the headline numbers to choose a refinancing loan to fit your financial goals.
1. Looking beyond the interest rate to service and support
If interest rates are similar, then which bank offers more flexibility? Can you make extra repayments without a penalty? Does the bank allow a repayment holiday if your financial situation changes? These conditions can make a real difference over time.
Having worked with all of New Zealand’s major banks and lenders, the mortgage brokers at Global Finance have valuable insights into each lender’s flexibility and service levels. Are they easy to contact? Do they respond quickly to questions?
Their experience means they know which institutions are easy to work with and who provides the best support. Good customer service matters; you’ll want to deal with a bank that’s responsive and easy to work with.
2. Assessing the rate of change
New Zealand banks vary in how quickly they adjust their mortgage rates following changes to the Official Cash Rate (OCR). Some banks respond promptly, while others may take longer.
If you take out a mortgage with a bank that is slower to reduce its rates after an OCR cut, you could be at a disadvantage. You might continue paying higher interest rates for a longer period.
This is particularly relevant if you have a loan fixed for a short term or your mortgage is floating. Our experienced team knows which banks tend to implement change faster than others.
3. Cashback considerations
Effectively, cashbacks are ‘free money’ from the bank to help with moving costs or renovations. But cashbacks come with conditions, and not all are created equal.
One of the conditions is a clawback period of three or four years. If you refinance within that period – maybe buy a new house, change lenders, pay off your debt or sell – the bank will take back either a percentage or all of the cashback money. The amount you need to repay will depend on how the lender calculates the clawback.
Most banks pro-rata their clawbacks. However, this could be either on a monthly pro-rata basis or an annual/percentage basis.
The monthly method results in a lower repayment because it recognises the exact time you’ve held the loan. An annual method won’t give you partial credit for months beyond full years.
For example, with some banks, the cashback period might be four years. However, each year may be pro-rated as one-quarter for each of the 4 years. Therefore, if you want to refinance after 18 months, you may need to pay back 75% of the money.
To make the maths clearer, let’s look at a cashback offer of $7,500 with a clawback period of 4 years. If you want to refinance after 18 months, you’ll have to give back $4,687.50 if your lender uses the monthly method to calculate repayments. However, if they use the annual approach, you’ll owe $5,625.00 – $937.50 more to repay.
Other clawbacks may be over 4 years yet only go down to 50% repayable after 2 years.
Our brokers are familiar with cashback conditions and will explain how each bank approaches them. They can also negotiate on your behalf to secure better cashback terms.
4. Offsetting interest
Some banks offer better deals if you bundle your home loan with other products like credit cards or insurance. Or what if you offset your mortgage with your savings? You may be eligible for better deals, like lower fees or less interest.
An offset mortgage lets you use your savings to reduce the interest you pay on your mortgage. It takes the positive balance in savings accounts and deducts it from the balance of the mortgage. You only pay interest on the difference between the two.
Again, not all banks’ offset policies are the same. Some banks may limit the number of accounts you can link for offsetting purposes while some may limit the amount of savings you can offset against your mortgage.
If you are in a position where your business has a healthy cash flow, or you can link accounts from family members or those held in trusts or companies, it could be possible to offset your entire interest, assuming savings permitted. However, because not all banks in New Zealand offer the same mortgage offset conditions and fees, you’ll need to find the bank that best suits your position. Our brokers know where to look.
5. Assessing account fees
Banks in New Zealand do not charge the same account fees. They can vary significantly, especially when it comes to offset and revolving credit accounts. Some major banks have one-time establishment fees while others charge offset variable rates and others charge upto $12.50 monthly account fees. Depending on the type of account, there may also be fees for certain transactions.
Given the variability in fees and account structures, having the most accurate and up-to-date information can be valuable when choosing a lender. Our mortgage brokers deal with banks on a daily basis and, literally, have all this information at their fingertips.
Make it easy and use the experts
If multiple offers look pretty good, but you’re still unsure, a broker from Global Finance can be a huge help. They can analyse each of the refinancing offers, highlight the key differences between lenders, and negotiate better deals on your behalf.
Our team will take the time to understand your financial goals and lifestyle. Whether you want to reduce your repayments, pay off your mortgage faster, or access equity for other investments, they’ll match you with a lender that aligns with those objectives. They’ll help you make decisions that suit your current needs and long-term plans. They will make sure you understand all the terms and conditions before committing to anything.
Our help and advice is free
Comparing multiple offers and negotiating with banks can be time-consuming. So, let one of our mortgage brokers handle the work on your behalf. Global Finance’s team knows how to present your application in the best light and their independent advice won’t cost you a cent.
At Global Finance, we do not typically charge our clients any fees, expenses or other amounts for the financial advice and other services we provide.
So, take Aseem’s advice and contact one of our mortgage brokers to help with your refinancing decision. Their guidance will make refinancing easier and ultimately more rewarding. Contact Global Finance to explore your refinancing options and get a solution tailored to suit. Call the team on 09 255 5500 or email info@globalfinance.co.nz
*The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.