Mortgage loans

Should I Refinance my Home Loan?

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By Kylie Cassidy and Brendon Ojala


With the banks competing for new customers and offering cash incentives, the temptation to switch banks can be rife. Brendon and Kylie ask if the switch is really worth it.


The first thing to note if you’re considering refinancing is that you should consider much more than just interest rates. The actual costs can vary depending on whether you have existing loans that are still fixed. There are also the non-monetary factors like finding a bank that better suits your needs or has a superior service level. These are all things to consider.


Turning to your mortgage broker for advice should be your first step as they can help you work out the pros and cons, in the meantime, here are four factors to get you thinking:


1. Does the bank suit my needs?


Consider the bank’s products and whether they will suit your current needs. Do you want to be able to make lump sum payments without penalty? Do you want a large revolving credit account? Or perhaps an offset product where you can use the funds across savings accounts to offset the interest on your mortgage?


2. Don’t get hung up on lower interest rates


Lower interest rates aren’t the be-all-and-end all, and often some smart budgeting coupled with the right mortgage structure can give you more than then a 0.2 per cent decrease in interest rates. We will of course, work hard to get a competitive rate from the bank, but it’s in this finer detail where your mortgage broker can add real value.


3. Making the switch can be messy


If you’re offered a cash incentive to move banks, chances are you’ll need to move your banking across to them. This means changing your APs, direct debits, salary and so on. Some banks do offer a “switching service” to make the process easier, but you may need to keep your existing account open with some cash in it, to cover any repayments or direct debits you may have forgotten about.


4. Costs of switching


Below are some costs to consider:


·         Potential break costs at your current bank (anywhere from zero to tens of thousands!)

·         Lawyers fees (approx. $1000-$1500)

·         Cash contribution claw backs (if your current bank offered you a cash contribution, if you move banks within a certain time frame—between two and four years—they reserve the right to ask for this cash back.

·         Discharge fees ($100-$150)


The new bank may offer you some cash to offset the above costs, however, it’s important to consider all of the above. The “best bank” offering the lowest rates changes all the time, so it’s important to consider your needs long term. 

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Kylie Cassidy and Brendon Ojala are Registered Financial Advisers with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Is selling by auction still a good idea?

Selling your home in an auction can be stressful. Will it meet reserve? If so, did we set reserve too low? And is now even the right time to be selling by auction? Jaimie McDonald shares his recent personal experiences.

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We sold our house recently. It had been a while since we last sold and that was in a completely different market to now. So, in going to market, we based our decisions on a mixture of advice from our real estate agent, a semi-educated "gut feeling" based on what we were seeing in the market ourselves, and the rest we left it up to the gods!

One of the biggest decisions we thought we needed to make was where to set our reserve. Do we go higher with the expectation of achieving the ridiculous prices many of our neighbours seemed to have been cashing over the last year or should we set a lower reserve in the hope that more buyers will be engaged once they knew the auction was "live"?

To our surprise, it turns out it was actually possible to adjust our reserve with the auctioneer we used during the live auction process. During the heat of the moment this added decision may not suit everyone. Personally, we felt it gave us the opportunity to be flexible yet still set a reserve based on the market price of the day and also ensure we weren't about to give our property away for a price we weren't happy with.

We sold our property, but this isn’t the case for many other sales by auction at the moment.

There was an article in The Herald last week citing that of the 130 Auckland properties sold by one particular auctioneer in the first week of October only 39 per cent of these properties were sold under the hammer. The article also went on to state recent figures by another auctioneer who passed in 45 per cent of homes on the North Shore, 40 per cent in central and eastern areas, and 28 per cent in south Auckland.

Speaking with other members of the industry, there does seem to be a higher percentage of auctioned properties currently going unsold. However, there also seems to be a considerable variance to success on the day between auctioneers overall. This made me think, how much of a difference does it make when you also have the ability to "move the posts"?

Is the auctioneer really better than another or does it come down to the experience and advice of the real estate agent before and/or after the auction?

One thing I can say is in our situation we were armed with good advice and possibly a little help from the gods. We were fortunate enough that we didn't need to worry about what would happen next if it was left unsold.


Jaimie McDonald is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.


Put Money on the Mortgage or into KiwiSaver?

It’s a common question that we get asked. You’ve got a mortgage and you want to pay it down, but you’d also like to save for the future through KiwiSaver. O, what to do? Rupert provides some insight.


Note that the following is very much generic advice. For more personalised advice you would need to see a wealth adviser.


In general, there are two groups of people that we can divide our answer into: self-employed and employed.


For the self-employed, the answer is fairly simple. There are currently no real benefits for putting your money into KiwiSaver except the ~$521 per year Tax Refund that you receive from the government (50c from the government for every $1 you put in up to a maximum from you of $1042 per year). 


So, in my opinion, every self-employed person who can afford it should have an automatic payment of $20 per week (or $40 per fortnight etc.) that is put into your KiwiSaver. Why? Because that $1042 would earn you ~$44 per year in interest and you receive a further $521 from the government. That’s a return of more than 50 per cent each year. It’s a no-brainer.


For employed people, you need to know the maximum percentage your employer is willing to match on your KiwiSaver deposits. For most employers, if you put in 3 per cent, they will put in 3 per cent (you lose tax on this, but it’s still a good deal). The best I’ve ever seen is if you put 9 per cent in, the employer will put in 13.5 per cent (so after tax, you get 9 per cent from them too). You would be absolutely mad to not put in that 9 per cent into your KiwiSaver. You are literally doubling your money.


Once you’ve sorted out the decision above, the question of how much money to put into KiwiSaver gets significantly more difficult. It involves weighing up post-tax profit in KiwiSaver versus non-taxable and taxable interest in your mortgage.  It’s hard. Certainly too hard to summarise in a blog.


But you can get those low-hanging fruit. Firstly, get joined up to KiwiSaver. If you’re self-employed and can afford it, get that automatic payment set up. If you are employed, find out how much your employer will match if you put money in and, again, if you can afford it, begin putting that money into your account.


Rupert Gough is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.