Refixing your interest rate can be a crucial decision in managing your mortgage, and knowing the ins and outs can make a big difference in your long-term financial success. Here are five essential tips to keep in mind before refixing your interest rate.
Be aware of your fixed-rate expiry date
Do you know when your current fixed-term rate is due to expire? If not, it’s time to check. This will allow you to prepare in advance, giving you ample time to research your options and make an informed decision. Keep a note of the expiry date and begin exploring your options ahead of time, so you don't find yourself rushing into a new fixed rate period without considering all the factors.
Align your goals with your mortgage strategy
Understanding your future plans and goals is key when refixing your interest rate. Are you planning to sell your home, make significant renovations, or pay off your mortgage early?
Your plans will impact which fixed rate term is appropriate for your situation (or whether a fixed rate is not appropriate at this time). Make sure your chosen mortgage strategy aligns with your long-term goals, as this may help you save on interest and achieve financial success.
Familiarise yourself with interest rate options
Before refixing your interest rate, it's important to understand the different rate options available. Generally, interest rates can be categorised into two main types: floating and fixed-term rates.
Floating interest rates are variable, meaning they can change at any time based on market conditions. While this can provide flexibility, it can also make budgeting more challenging due to the potential for fluctuating mortgage repayments.
Fixed-term interest rates, on the other hand, remain constant throughout the agreed-upon term. This provides stability and makes budgeting easier, as you know exactly what your repayments will be for the duration of the fixed term. However, if market interest rates decrease in the meantime, you won’t be able to take advantage of lower interest rates right away. You could still break your fixed rate, but there may be costs involved with it that may offset the savings. Make sure you talk to us before you choose to refinance a higher-rate fixed term loan on to a lower rate fixed term.
Understand your mortgage structure
It's crucial to know how your mortgage is structured before refixing your interest rate. Mortgages can be set up in various ways, fixed rate, variable rate, or a combination of both.
As mortgage advisers, we can provide valuable guidance in this area. For example, we can work with you to review your mortgage structure and discuss whether any changes would be beneficial if you are considering whether to refix your interest rate.
We’re in your corner
Refixing your interest rate can be a significant decision, and being well-prepared is crucial to making an appropriate choice for your situation.
Like to talk about it? Don’t hesitate to contact us. As mortgage advisers, we’re here to answer any questions you may have.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
Link Financial Group Ltd trading as Mortgage Link and Insurance Link FSP 696731 holds a licence issued by the Financial Markets Authority to provide financial advice. Please visit https://mortgagelink.co.nz/available-disclosure/ for more information and Disclosure information.
