What is refinancing?
Refinancing means replacing your existing mortgage with a new one — either with your current lender (re-fixing) or by switching to a different bank or lender. Kiwi homeowners refinance to get a better rate, access equity, consolidate debts, or change their loan structure.
When should you refinance?
- Your fixed term is about to expire — this is the ideal time, as there are no break fees
- Rates have dropped significantly — even mid-fix, the savings might outweigh break fees
- Your financial situation has changed — higher income or more equity can qualify you for better rates
- You want to restructure — switch from interest-only to principal and interest, split your loan, or add an offset
- You need to access equity — top up your mortgage for renovations or investment
The refinancing process
- Compare rates — use RatePal's comparison tool to see what's available
- Calculate the savings — use the mortgage calculator to compare your current vs potential new rate
- Get pre-approval — apply to the new lender before committing
- Check for break fees — ask your current bank what it would cost to leave early
- Factor in cash-backs — the new lender's cash contribution may cover switching costs
- Your solicitor handles the rest — they manage the legal transfer between banks
Understanding break fees
If you refinance before your fixed term ends, your bank may charge a break fee. This compensates the bank for the interest they'll lose. Break fees can range from a few hundred dollars to tens of thousands, depending on your loan size, rate, and how much time is left on your fix.
Costs of refinancing
- Break fees — potentially $0 to $10,000+ (if mid-fix)
- Solicitor/conveyancer fees — $800–$1,500 (some banks cover this)
- Valuation — $0–$800 (often waived by the new lender)
- Discharge fee — $0–$300 from your old bank
Tips for a successful refinance
- Start comparing rates 6–8 weeks before your fixed term expires
- Get quotes from at least 3 lenders
- Don't forget to negotiate — banks don't want to lose customers
- Ask about cash-back offers to offset switching costs
- Compare all current NZ mortgage rates before deciding
Frequently asked questions
When is the right time to refinance my mortgage?
Refinance when interest rates fall 0.50–0.75% or more below your current rate, or when you want to access equity (cash-out refinance). Also refinance 4–6 weeks before your fixed term expires to avoid being rolled onto an unfavourable rate. Run the numbers with our calculator to confirm the savings.
What are the costs involved in refinancing a mortgage?
Common refinancing costs include: application fees ($200–$400), valuation fees ($300–$600), legal fees ($800–$1,500), and break fees if breaking a fixed rate early. Total costs typically range $1,500–$3,000. If refinancing to a much lower rate, these costs are often recovered within 12–18 months.
What is a break fee and how is it calculated?
A break fee (or Early Repayment Fee) is the cost charged by your lender if you exit a fixed-rate loan before the term ends. It's calculated as the difference between your locked rate and the current market rate, multiplied by the remaining loan balance and term. For example, exiting a 5% rate when market rates are 4.5% can cost thousands.
Can I refinance with a different lender to get a better rate?
Absolutely. Switching lenders at the end of your fixed term is free (no break fee applies). You'll still pay application, valuation, and legal fees, but these are typically lower than break fees. Start shopping 4–6 weeks before your fixed term ends to negotiate a competitive rate.
Will refinancing affect my credit score?
Refinancing triggers a hard credit inquiry, which may temporarily lower your score by 5–10 points. The impact is minimal and recovers within a few weeks. Multiple inquiries within 14 days count as one, so shop around quickly if comparing lenders.
Check if refinancing will save you money
Compare current mortgage rates and see how much you could save by switching to a better deal.