Is It Worth Refinancing Your Mortgage?

The sum that answers it

Refinancing is worth it when what you gain is clearly more than what it costs to move. Written out:

1. Gains: interest saved over the time you expect to stay, plus any cash contribution from the new lender.
2. Costs: legal fees, the discharge fee, any break fee, and any cashback you'd have to repay to your current lender.

Take a $600,000 loan and a rate 0.25% lower. That's roughly $1,500 a year in interest. If moving costs $1,500 in legal fees and the new lender contributes $3,000, you're ahead on day one. Add a $6,000 break fee and the same switch takes years to pay back. These are illustrations, not offers. Your own figures go in our refinance savings calculator.

When it usually pays

• Your fixed term is about to end, so there's no break fee, and you're past any clawback period.
• Your bank's refix offer is noticeably worse than what other lenders are offering people like you.
• You need something your bank won't do: lend more, count your income differently, or offer an offset account.
• You went to a non-bank lender when you had to, and your situation has since improved.

When we tell people to stay

• You're early in a long fixed term and the break fee is large.
• Your current lender paid you a cash contribution recently and would claw it back.
• The loan is small. The costs of moving are mostly fixed, so a small rate gain on a small balance doesn't cover them.
• Your income has dropped or your debts have grown since you borrowed. A new lender assesses you from scratch, and your existing lender doesn't have to.

There's a third answer people forget. Ask your current bank to sharpen its offer first. Banks would rather keep you, and a competing offer in writing is the best leverage you'll ever have. Plenty of our refinance reviews end with the client staying on a better rate.

It isn't only about the rate

A lower rate with the wrong structure can cost more than a slightly higher rate with the right one. If you have savings sitting idle, an offset or revolving credit facility could save more interest than a rate cut. If you want to clear the loan early, check how much extra you can pay without penalty. Compare the whole package.

This article explains how New Zealand lenders generally assess these situations. It is general information, not personalised financial advice, and lender policy changes often — check your own position with a registered adviser. Official sources: Reserve Bank of New Zealand for lending policy and the OCR, and Sorted.org.nz for independent government-backed money guidance.