You may need to re-fix. You probably don’t need to re-finance.

Many people have taken out fixed interest loans in recent years. Eventually the day comes when this fixed rate reaches the end of its term.

The bank will notify you by letter or email. If you do nothing, your mortgage will default to a floating interest rate.

If you don’t want this to happen, you need to talk to us.

How to get the best deal when you re-fix.

It’s pretty straightforward but there’s a process we need to go through to help you get the best outcome.

We’ll start by asking a few questions to find out whether you’d be better off with a fixed or floating rate. For example, if you’re planning to sell in the near future then you should probably have a floating rate (and no penalties for breaking a fix). Similarly, if you have a chunk of money ready to pay down the loan, then you can do that before you re-fix.

We will also ask if there have been significant changes in your life, such as your marital status or employment. We’re not being nosey – the FMA requires us to check your financial circumstances before we offer advice. The idea is to ensure you get a loan that’s tailored to your needs rather than simply rolling over old arrangements.

The good news is that there’s no need to go through your finances in great detail. This onerous process only applies if you’re changing the type of mortgage you have. 

For instance, you’ll need to go through the full re-application process if you switch from a fixed term to revolving credit. You will also need to re-apply if you’re changing the identity of the borrower from a company or trust to an individual, or vice versa.

In most cases, it’s pretty simple to re-fix.

Re-financing is a different kettle of fish.

When should you re-finance?

It’s much less common for homeowners to re-finance. Shifting a loan from one bank to another triggers the full application process, with plenty of paperwork and intrusive questioning required by the CCCFA. It’s not a speedy process.

Sometimes I get requests to re-finance because someone has seen a temptingly low rate and thinks he or she can save money by switching banks. In most cases, any savings on interest are wiped out by the legal and loan set-up fees when you switch.

One good reason to shift is when you’re with a bank that doesn’t specialise in residential lending. These banks tend to have poor systems and patchy service. So there might be a good case for re-financing in these circumstances.

Of course, there are always exceptions. The only real rule is to get advice before you take a decision on a loan with huge financial implications.

And advice is what we’re all about.