This article provides information on working with a mortgage adviser when you’re refinancing a mortgage. We also have a free service that connects you with one of New Zealand’s best mortgage advisers from our handpicked panel.
First up, let’s define ‘refinancing’. It can be a confusing word, because it’s often used to describe the process of refixing or restructuring an existing loan. The generally accepted definition of refinancing your mortgage is repaying your current loan and taking out an entirely new one. You can stay with your existing lender or switch to a new one, depending on which option offers the most benefits.
There are many reasons to refinance a property, whether it’s the home you’re living in or a renter in your investment portfolio. You might want to…
- Tap into some equity to raise funds for a financial emergency, another property purchase or home improvements
- Extend an interest-only period, but your existing lender has said “no”
- Extend the term of your loan to decrease repayments.
- Take advantage of a cashback promotion, which some lenders offer to entice new customers in the door
- Consolidate your debts into your home loan to reduce the interest you’re paying
- Snap up a competitive interest rate to become mortgage-free sooner
- Vent your frustration with poor service by taking your borrowing elsewhere
The benefits of working with an adviser for refinancing
While there’s nothing to stop you from researching various options for refinancing, getting an expert to do the leg work makes a lot of sense – especially in the current lending environment. Working with a mortgage adviser (aka mortgage broker) usually costs you nothing, because their income comes from commission paid by the lenders. Read more about who pays a mortgage broker.
To give you an idea of how a top mortgage adviser could make a difference and answer some refinancing FAQs, we interviewed Cameron Marcroft of Loan Market Central. Here’s what he had to say.
Q. What’s the main benefit of working with a mortgage adviser for refinancing?
Working with an adviser will make refinancing more beneficial because the adviser’s working with all banks, not just one. The top advisers have vast experience in lending, which can help to provide you with more options and a smoother ride through the loan approval process. Also, they’re going to work with you ongoing for the life of that loan, to help you achieve your goals. What’s more, it’s worth remembering that an adviser is working for you, not the bank. With an adviser, your best interests come first.
Q. How can an adviser help with mortgage structure?
A mortgage adviser will help you to choose the optimum loan structure to reduce your interest, which is an important piece of the refinancing puzzle. The less interest you pay over the life of a loan, the better. Good decisions at the refinancing stage can save you thousands as the years tick by. Your mortgage adviser will work with you to define your financial goals and how quickly you can afford to repay. They can also talk about the different products that are available to pay a mortgage off quicker. These can be reviewed each year for the life of your loan.
Q. Do you have to move your banking if you refinance with a different bank?
If you want to refinance to a new bank, generally there is no requirement for you to move all your banking to that bank. However, often it makes financial sense to put most of your accounts in one place. For example, you can reduce your mortgage faster by having income direct-credited into your mortgage account (revolving credit) or using savings to offset your mortgage (offsetting mortgage).
Q. Will a registered valuation be required for refinancing?
Valuations are only required in certain instances. An adviser will be able to tell you this upfront. The cost of a valuation can vary depending on the size of the property and how quickly the valuation is needed. You and your adviser can’t choose who does the valuation, because there can be no personal connection with the valuer. At Loan Market we use a third party panel of valuers who bid for valuation jobs.
Q. Do advisers know all the latest lending rules and requirements?
Banks’ policies are continually changing and it’s the adviser’s job to keep up-to-date with these, so that they can advise accordingly. Different banks will have different calculators for assessing whether and how much they could lend you. Advisers know how each major lender assesses a loan application, which can help you to get the loan you need.
Q. Is your existing bank included in the refinancing options?
Absolutely! Your adviser should always include your existing lender as an option. When considering your existing bank versus other lenders, it’s important to remember there’s an inconvenience factor when you move banks that only you can put a value on. Your adviser can help you make an educated decision on whether it’s in your best interests to move from your current lender.
Q. How do advisers price up the various options for refinancing?
Once an adviser has assessed your situation, they will develop some options. Advisers can price up a number of deals without sending an application into the banks, so you will see real figures and loan options that will help you to make a wise decision.
To learn more read our article ‘What does a mortgage broker do?’