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  2. Q1 2016: Low rates and break fees

Mortgages Q1 2016: At a glance 

Wealth Works Mortgage Broker Kim Gallie shares the latest Mortgage updates plus give her tips on breaking and refixing your current loan to take advantage of the lower rates...

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Q1 has kicked off with a bang in the world of Mortgages! Reserve Bank Governor Graeme Wheeler surprised us on March 10th by cutting the Official Cash Rate and he looks set to cut it again as soon as April 28th 2016. 

 

Interest rates are at an all time low, which means new and existing borrowers can take advantage when buying, borrowing or looking to save money by sharpening up their existing home loans. One of the key benefits of using a mortgage broker is they work with many lenders to negotiate rates and cash back offers. 

They can also investigate fixed rate loan break costs for you.  Break costs are charged when you break a fixed rate loan in a market where the rate you have locked in, is higher than the current market rates. Therefore when you break your fixed rate contract, the bank incurs a loss and this is the cost they pass onto you, as the borrower.  

With that in mind, a common question our clients ask is;


Should I break and refix my current loans to take advantage of the lower rates?

This depends on your particular situation, taking into account the rates you’ve been offered and what break costs you’ll incur.


Case Study 

We recently worked with a couple who had a mortgage of $500,000 fixed until 2019 at 6.74%.  To refix at today's rates until 2017 they were offered a rate of 4.64%. The one off loan break cost was $14,607.

 

Our analysis showed that they’ll break even in 17 months and the savings they would make over that period is $19,818. That means that per month they have an additional $875.00 in their pocket.

 

*Another point to consider is that if you refinance to a new bank, their cash back offer can sometimes be enough to cover the break costs you’ll be charged, so you’re ahead straight away!

Will you save money by breaking and refixing your home loans? 
Contact us today for a complimentary Loan Break Free Analysis 09 306 5820
Kim Gallie | kim@wealthworks.co.nz

 

 


 
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