Choosing what to do when your fixed home loan term ends can have a big impact on your finances. You may be wondering whether to refix with your current bank, refinance your mortgage, or switch lenders for a better deal.
The right choice depends on more than just the interest rate. You also need to look at fees, cashback offers, break costs, loan features, your equity and your financial goals.
Understanding the difference between refix, refinance or switch lenders can help you make a more informed decision. In this guide, we explain seven important things to consider before deciding what to do with your NZ home loan.
1. Understand the Difference Between Refix, Refinance or Switch Lenders
The first step is knowing what each option actually means. Refixing, refinancing and switching lenders can sound similar, but they are not always the same process.
What Does Refixing a Home Loan Mean?
Refixing usually means choosing a new fixed interest rate with your existing lender when your current fixed term ends. Your loan generally stays with the same bank, but you agree to a new fixed-rate period.
For example, you may currently have a two-year fixed mortgage that is coming to an end. Your bank may offer you several new fixed terms, such as six months, one year, two years or longer.
Refixing can be convenient because you already have a relationship with the lender. You may not need to move your mortgage to another bank, which can make the process relatively straightforward.
What Does Refinancing Mean?
Refinancing means replacing your existing mortgage with a new home loan. You may refinance with your current lender or move the mortgage to another lender if that option better suits your needs.
Refinancing can be used to:
- Find a more competitive interest rate
- Change your loan structure
- Reduce repayments
- Access available equity
- Consolidate certain debts
- Get different loan features
- Review your overall mortgage strategy
Sorted explains that refinancing replaces your current mortgage with another loan with different terms. It can involve staying with your existing lender or moving to another lender. Read the Sorted guide to refinancing your mortgage for more information.
What Does Switching Lenders Mean?
Switching lenders means moving your mortgage from your current bank or lender to another provider. In many cases, this is also a form of refinancing because the new lender pays out the existing loan and replaces it with a new mortgage.
The key difference is that switching lenders gives you the opportunity to compare the wider market. You can look beyond your current bank rather than simply accepting the rate offered by your existing lender.
2. Check Your Current Mortgage Before You Make a Decision
Before comparing new loans, start by understanding exactly what you already have. Your current mortgage may contain features or costs that affect whether changing lenders makes financial sense.
Check:
- Current interest rate
- Fixed-rate expiry date
- Remaining loan balance
- Remaining loan term
- Loan structure
- Break fees
- Early repayment conditions
- Cashback or incentive repayment conditions
- Offset or revolving credit facilities
- Current repayment amount
- Available equity
Your fixed-rate expiry date is particularly important. If your fixed term is ending soon, you may have a good opportunity to review your mortgage without needing to break your current fixed arrangement.
The Reserve Bank of New Zealand explains that fixed mortgage rates generally remain in place for the agreed fixed term. When that term ends, borrowers can arrange another fixed term or move to another loan structure. You can read more in the Reserve Bank’s explanation of fixed and floating mortgage rates.
Start reviewing your options before the expiry date rather than waiting until the last minute. This gives you time to compare lenders and understand any costs involved.
3. Compare the Interest Rate — But Don’t Stop There
A lower interest rate can make a major difference, but it should not be the only factor you compare. A mortgage with a slightly lower rate may not actually be better if it comes with significant costs or less suitable features.
Look at the Total Cost
The best mortgage decision comes from comparing the overall financial outcome. Consider:
- Interest rate
- Loan fees
- Legal costs
- Valuation costs
- Break fees
- Cashback conditions
- Discharge fees
- Application fees
- Ongoing account fees
- Loan features
For example, a new lender may offer a lower rate and a cash incentive. However, you still need to check whether switching costs or other conditions reduce the benefit.
Consider the Interest Rate Term
The length of the fixed term can also affect your decision. You might choose a shorter term for flexibility or a longer term for greater repayment certainty.
There is no single fixed term that works for every borrower. Your income, financial goals, cash flow and expectations about future interest rates all matter.
The Reserve Bank notes that mortgage rates can respond to changes in monetary policy, although the effect does not necessarily flow through immediately. For current information about monetary policy, visit the Reserve Bank’s Official Cash Rate page.
4. Work Out Whether Refinancing Is Actually Worth It
Refinancing can look attractive when another lender advertises a lower rate, but you need to calculate the real benefit. A small rate difference may not justify the cost of moving your mortgage.
Calculate Your Potential Savings
Start by comparing your current interest cost with the potential cost under the new loan.
For example, imagine you have a $500,000 mortgage and another lender offers a rate that is 0.50% lower.
The potential interest difference may look attractive.
But you then need to consider switching costs. These could include legal fees, valuation costs, lender fees or the repayment of a previous cashback incentive.
Consider How Long You Will Keep the Loan
The longer you benefit from a better loan arrangement, the more opportunity you may have to recover switching costs.
A decision that saves money over several years may be worthwhile, while a small short-term saving may not justify the effort and expense of switching.
Sorted recommends comparing the costs of refinancing against the potential savings before making a decision. Read the Sorted refinancing guide before comparing offers.
If you are considering refinancing, read GM Finance’s guide on when to refinance your mortgage for more practical considerations.
5. Check Your Equity and Lending Position
Your current equity can influence the options available to you. Equity is broadly the difference between your property’s current value and the amount you still owe on your mortgage.
For example:
Property value: $800,000
Mortgage balance: $500,000
Approximate equity: $300,000
A stronger equity position may improve your lending options, although every lender applies its own criteria.
Why Your LVR Matters
Your loan-to-value ratio, or LVR, is another important part of the picture. It compares the amount you owe with the value of your property.
For example, a $500,000 mortgage against an $800,000 property represents an LVR of 62.5%.
LVR can affect the interest rate, lending options and costs available to you. The Reserve Bank of New Zealand explains that banks apply their own lending criteria in addition to the Reserve Bank’s macroprudential requirements. Learn more in the Reserve Bank’s LVR restrictions guide.
This is one reason you should review your property value and loan balance before deciding whether to refix, refinance or switch lenders.
6. Look at Your Loan Structure and Features
The cheapest interest rate is not always the best mortgage if the loan structure does not fit your lifestyle. Before making a change, think about how you use your mortgage.
Fixed Rate
A fixed rate gives you greater repayment certainty for the agreed period. Your interest rate generally remains unchanged during the fixed term.
This can make budgeting easier because you know what your scheduled repayments are likely to be.
The trade-off is flexibility. Depending on your loan terms, making large additional repayments or changing the loan before the fixed term ends may result in costs.
Floating Rate
A floating rate gives you more flexibility but less certainty. The interest rate can change, which means your repayments may also change.
This structure can suit borrowers who want to make additional repayments or keep more flexibility in their mortgage.
Split Loan
A split mortgage combines different loan structures. For example, you could fix most of your mortgage while keeping a smaller portion floating.
This can give you a balance between repayment certainty and flexibility.
GM Finance has a detailed guide explaining the pros and cons of fixed versus floating home loan rates.
7. Don’t Automatically Accept Your Bank’s Offer
Your existing bank may make refixing easy, but convenience should not stop you from comparing your options. Your bank knows your mortgage, but another lender may offer a different rate, structure or incentive.
Ask Your Current Lender What They Can Offer
Start by asking your current lender about its available rates and options. You may be able to negotiate a better deal without moving your mortgage.
Ask about:
- Available fixed terms
- Interest rates
- Cashback or incentives
- Loan restructuring
- Flexible repayment options
- Fees
- Special pricing
Compare Other Lenders
Next, compare what other lenders are offering. This does not mean you should automatically switch, but it gives you a better understanding of the market.
The Reserve Bank publishes mortgage interest rate data for New Zealand, which can help borrowers understand broader movements in advertised lending rates. You can review the Reserve Bank’s residential mortgage interest rate data.
Comparing options can also give you a stronger position when discussing your mortgage with your existing bank.
Refix, Refinance or Switch Lenders: Which Option Is Right?
The right choice depends on your circumstances rather than one universal rule. Use the following guide as a starting point.
| Your situation | Option to consider |
|---|---|
| You are happy with your current lender | Refix |
| Your current lender offers a competitive rate | Refix |
| You want a different loan structure | Refinance |
| Another lender offers a better overall deal | Switch lenders |
| You want to access equity | Refinance |
| You want to consolidate eligible debt | Refinance |
| Your fixed term is ending | Compare all three options |
| You want better loan features | Refinance or switch |
| You want repayment certainty | Consider fixing |
| You need greater repayment flexibility | Consider floating or split lending |
This table is a starting point rather than personal financial advice. Your lender will assess your circumstances and lending criteria before approving any new mortgage arrangement.
When Should You Start Comparing Refix, Refinance or Switch Lenders Options?
Do not wait until your fixed rate expires to start thinking about your next move. Give yourself enough time to review your mortgage and compare alternatives.
A useful process is:
1. Check Your Fixed-Term Expiry
Start by confirming when your current fixed rate ends. Put the date in your calendar so you do not forget it.
2. Review Your Mortgage
Next, check your loan balance, interest rate, structure and remaining term.
3. Review Your Property Equity
Understanding your approximate equity can help you assess your current lending position.
4. Check Potential Costs
Find out whether breaking your existing fixed term or leaving your current lender would create additional costs.
5. Compare the Market
Look at your current lender and alternative lenders before deciding what to do.
6. Calculate the Overall Benefit
Compare the potential savings with all costs rather than focusing only on the headline rate.
7. Make Your Decision
Once you understand the numbers, choose the option that best fits your financial goals.
What Are the Costs of Switching Home Loan Lenders?
Switching lenders can have costs, so make sure you understand them before moving forward. The exact costs depend on your mortgage, lender and circumstances.
Possible costs can include:
- Break fees
- Legal fees
- Property valuation fees
- Loan establishment fees
- Discharge fees
- Repayment of previous cashback incentives
- Other lender-specific costs
The costs can vary significantly between borrowers. Ask your current lender and potential new lender for a clear breakdown before making a decision.
Sorted also recommends checking break fees and other refinancing costs before deciding whether a new mortgage is financially worthwhile. See the Sorted guide to refinancing costs.
Can You Refinance Without Changing Banks?
Yes, refinancing does not always mean moving to another bank. You can discuss restructuring or replacing your current mortgage with your existing lender.
This can be useful if your current bank is willing to offer competitive terms. You may be able to change your loan structure or negotiate a better arrangement without going through the full process of moving lenders.
However, it is still worth comparing the wider market. You may find that another lender offers a better overall combination of rate, features and incentives.
Why Mortgage Advice Can Help
Comparing refix, refinance or switch lenders options can become complicated when you start looking at rates, fees and loan structures. A mortgage adviser can help you compare options based on your individual circumstances.
A mortgage adviser may help you:
- Compare lenders
- Review your existing mortgage
- Understand potential refinancing costs
- Compare loan structures
- Assess potential savings
- Prepare your application
- Understand lender requirements
- Manage the refinancing process
GM Finance works with multiple lenders to help New Zealand borrowers explore suitable home loan options. The team assists with home loans, refinancing and different mortgage structures.
You can also read The Advantages of Working With a Mortgage Advisor to learn more about how professional mortgage guidance can help.
Refix, Refinance or Switch Lenders Checklist
Before making your decision, run through this simple checklist.
- ☐ Check when your fixed rate expires
- ☐ Confirm your current interest rate
- ☐ Check your remaining mortgage balance
- ☐ Review your loan structure
- ☐ Estimate your current property value
- ☐ Calculate your approximate equity
- ☐ Ask your lender about refixing options
- ☐ Ask about any break or exit fees
- ☐ Check whether cashback needs to be repaid
- ☐ Compare other lenders
- ☐ Compare interest rates
- ☐ Compare loan features
- ☐ Calculate potential savings
- ☐ Consider legal and valuation costs
- ☐ Think about your long-term financial goals
- ☐ Get professional advice if you need help comparing options
Completing these steps can help you make a decision based on the full cost and benefits rather than simply choosing the lowest advertised rate.
Final Thoughts: Refix, Refinance or Switch Lenders?
When your fixed mortgage term comes to an end, you do not have to automatically accept the first rate your bank offers. Take the opportunity to review your mortgage and compare your options.
Refixing can be simple if you are happy with your existing lender and its offer. Refinancing may make sense if you want to change your loan structure, access equity or improve your overall mortgage terms.
Switching lenders can be worth considering when another provider offers a better overall deal. However, you should always compare the potential savings with the costs involved in moving your mortgage.
The best choice is the one that fits your financial position, goals and future plans. Taking time to compare your options before your fixed term ends can help you make a more confident mortgage decision.
Ready to Review Your Home Loan?
Your next mortgage decision could affect your repayments for months or years, so it is worth getting the numbers right. Whether you are considering a refix, refinance or switch lenders option, GM Finance can help you compare suitable home loan solutions.
Talk to the GM Finance team about your current mortgage, your goals and the options available to you.
Explore GM Finance Home Loans or contact the GM Finance team to discuss your mortgage options.
Lending is subject to lender criteria, responsible lending requirements and approval. Interest rates, fees, lending policies and eligibility requirements can change. This article provides general information and does not constitute personalised financial advice.