Consider your options before rushing to lock in the lowest rate

With the Reserve Bank cutting the Official Cash Rate by 50 basis points to 2.5%, major banks moved swiftly to reduce mortgage rates, some even before the announcement was made. While that’s welcome news for borrowers, it’s also the right time to pause and look at your options.

When interest rates drop, it’s easy to focus on chasing the lowest number. But the lowest rate isn’t always the only consideration. The value also lies in how your loan is structured and what flexibility it gives you over time.

Here are some things to consider.

Break costs

If you’re thinking about refinancing, start by checking for break or early repayment costs. These are fees some lenders charge if you repay or restructure a fixed-term loan early.

You should consider asking your lender for a formal discharge or payout figure before signing anything new; even a small timing difference can change the cost.

Some lenders will sometimes offset these fees through cashback offers or contribution deals, but you need to do the math carefully. A lower rate that comes with high break fees may not save you much in the long run.

Cashback offers

Many lenders offer cash contributions or refinance incentives. For example, some lenders are advertising “no legal fee and no registered valuation” on certain refinance packages, while others may offer direct cash bonuses.

These offers often come with strings attached, such as staying with the new lender for a set period or repaying the cashback if you refinance again too soon.

Cashbacks can be useful, but they’re not free money. Be sure you understand the fine print before counting them as part of your savings.

Legal

Refinancing is a legal process, just as much as a financial decision. It involves discharging your old mortgage, registering a new one, and ensuring the lender’s security is correctly recorded on your property title through Land Information New Zealand.

Extra steps may be required if your property is owned by a trust or company, or if there are guarantees attached to your existing loan. These need to be released or replaced as part of the refinance.

You should also consider the implications for broader estate planning (e.g. ensuring mortgage documents, powers of attorney, guarantees, trusts, and wills align) when refinancing.

If switching lenders, a solicitor can manage the timing and documentation to ensure there are no gaps in registration or delays in settlement, issues that can otherwise create stress and unexpected costs. The key risk is coordination. Switching lenders can make sense financially, but the execution needs to be well-managed legally.

Advice

While you might start by talking to your current lender, you should also consider speaking with an independent financial advisor. They can help compare products across lenders and explain incentives such as refinance cashbacks. You should not assume loyalty will always yield the best deal; competition can bring better options.

The key here is to have options.

Now is a good time to explore your options, not just your rate. Loan structure, timing, and legal execution all play a role in getting the right outcome. Whether you’re looking to reduce your repayments, access equity, or simply improve your loan terms, take the time to review the full picture with the right people around you. In most cases, you should engage with a lawyer early.

At Wilson McKay, we assist clients with the legal side of refinancing, from reviewing documentation through to discharge, registration, and settlement.

Refinancing might also be an opportune time to review your overall property and personal legal structure (insurances, guarantees, trust settings, estate documents, etc.).

Disclaimer

This publication reflects the personal views of the author about the subject matters discussed, and is based upon sources reasonably believed to be reliable and accurate. The views of the author do not necessarily reflect the views of Wilson McKay Barristers & Solicitors. No part of the compensation of the author was, is, or will be, directly or indirectly, related to any specific recommendations or views expressed. The information in this publication is solely for information purposes and is not intended to be legal or financial advice. Readers should not act on the information without consulting qualified professionals to consider the specific circumstances.