Is it worth changing my mortgage to another bank?

This has been a common question over the last few months with generous major bank ‘cashbacks’ on offer and interest rates dropping, but now on the way back up!

As mortgage advisers we need to look at things holistically and changing banks needs to be putting you in a better position or help you reach a goal your existing bank won’t help you reach.

Obviously changing the mortgage and banks can be a time-consuming pain and this is what holds a lot of people back from doing it. 

I noticed many of the borrowers looking to refinance recently had good incomes, but their existing banking and mortgage set up was a bit of a mess. So, refinancing helped get significant cashback, better loan products and we implemented a system to make things easier for paying off the loan quicker. Plus help avoid nasty unarranged overdraft and missed payment fees. 

Some typical scenarios where it has been worthwhile changing banks has been:

• Looking to drop down to lower rates and a new bank will help cover the costs of doing that (paying cashback to help towards break costs and legal costs to change)
• Another bank having better loan products to help you get mortgage free faster
• Looking to consolidate debt and possibly extend the term of the mortgage to ease cashflow, another bank being more receptive to that than the existing bank
• Looking to top up the existing mortgage for renos and or debt consolidation – often the existing bank saying no but a new bank saying yes
• Restructuring existing mortgages and putting rental properties into a Look Through Company (LTC) structure to maximise tax benefits. A new bank paying cashback can help cover the cost of the structure and ownership change
• Being disillusioned with your current bank who haven’t been valuing your business

As mentioned, the key to it all is making sure we are improving your financial position with a change in mortgage/bank. 

We do need to factor in the legal cost to change (though one bank helps cover that including giving cashback). Also, if a bank has paid you cashback in the last 3 years, you may need to pay some of that back if you change the mortgage too soon. 

As we get busy in our lives, we struggle to check in often enough to review our financial position. Every now and again we need to pause and have a review of how everything is set up. Personal insurance (life, income, mortgage, trauma etc) and KiwiSaver are similar in terms of needing regular reviews. 

So, if you think your situation needs a review, please reach out to Craig Pope to have a look at your situation.