Refinancing is a term usually used to describe when someone changes lender.  In the case of a residential home this normally means changing the mortgage from one bank to another. At the same time the loan to the previous bank is repaid with the money from the new bank.  Ordinarily a lawyer does this for people and their bankers.

 

Most lenders let you repay your loan at any time but if the loan is being repaid during a period you have a fixed interest rate they may charge a fee because you are repaying early.   You should always check with your existing bank as to whether there will be any charge. 

 

Different banks use different ways of working out whether you will have to pay anything or not.  The two main methods relate to changes in interest rates since the interest rate was fixed.  Some banks use the retail rates and generally if the existing rate for the same type of loan is lower than the rate you have then you will probably have to pay any loss the bank makes because, in theory, they borrowed the money at a higher rate.  Other banks work on a theoretical wholesale interest rate and if this has dropped then you may have to pay a charge.  This notional or theoretical rate is a rate the bank determines they borrowed the money at.  This does not go up or down at the same rate as the retail rate so even if the retail rate has gone up you may be liable to pay a charge for breaking the fixed rate period.

 

The new bank will have similar requirements in respect of the property to the old one.   They will usually want to be the only mortgagee, they will require the property to be properly insured and for there to be no charges, like rates, outstanding in respect of the property.   Your lawyer will be required to check all these things, including the title.

 

Banks will sometimes contribute towards your legal fees when you change banks.  We can sometimes complete the transaction within this amount.  Email nancy@capitallaw.co.nz and we will send you a brief questionnaire which will help us determine if we can do this for you.

 

To see if we can help you email us at nancy@capitallaw.co.nz or daryl@capitallaw.co.nz or call us on 04 381 2234 and ask to speak to a lawyer.  All enquiries will be kept in the strictest confidence.