Why Refinance?

Whether you're consolidating debt, releasing equity, or taking advantage of market conditions, refinancing can be an effective way to optimise your financial position.

Some key considerations before a client decides to switch banks and start the refinance process are:

• Fixed vs. Floating Rates – Weigh the benefits of fixed versus floating interest rates in line with your financial goals.

• Loan Terms – Review the loan period, repayment structure, and potential early repayment penalties.

• Break Fees – If your current mortgage is on a fixed term, you may incur break fees for early repayment.

• Lender Requirements – Different lenders have varying eligibility criteria, such as credit assessments and income verification.

Due Diligence Investigation

For refinancing, it’s prudent to retain the services of a solicitor to conduct the due diligence process to assess financial implications and legal risks. This includes:

• Reviewing loan terms and conditions to ensure they align with your financial goals.

• Checking for any encumbrances or restrictions on the property that may affect refinancing.

• Understanding the lender’s insurance criteria ensuring compliance.

• Consulting with a financial advisor to mitigate risks and optimise loan structuring.

Here’s a breakdown of the Refinancing Process

1.    Timing and loan structuring

It’s worth considering when you want to refinance your property to ensure that you received funds from your new lender in sufficient time to repay your existing lender – e.g. factor in when you are coming off fixed rates and when higher floating rates may automatically apply unless you refix.  Once you have a preferential refinance date you can assess the best loan structure and lender.

2.    Utilise a Mortgage Advisor

Understanding the best option for lending can be overwhelming. We suggest that you engage a mortgage advisor to help you out with the process, compare the various banks and negotiate the best deal (e.g. a cashback, more on this point below). Mortgage advisors get paid by the banks and are no cost to you so why not use their services! If you need help finding a mortgage advisor, NZ Legal has a trusted network of advisors which we can connect you with.

3.    Discharge of Mortgage

Once you have selected a bank for refinancing and initiated the legal process, your lawyer will coordinate the discharge of your existing mortgage. This involves formally contacting your current lender to request the mortgage discharge and obtaining the final repayment amount.

4. Registering the New Mortgage

Once the existing mortgage is discharged, the new mortgage will be registered over the property. This involves filing the necessary documents with LINZ to ensure the new lender’s security interest is properly recorded. A lawyer facilitates this process and the new lender’s name will be recorded on the record of title for the property.

5. Documents You Need to Sign

As part of the refinancing process, you will be required to sign several key documents, including:

• Loan agreement with the new lender

• Authority & Instruction (A&I) form to discharge the previous mortgage and register the new mortgage with LINZ

6. Insurance Requirements

One component of the refinance process that you will need to arrange is updating your home insurance to reflect the new lender’s financial interest in your property.

To do this, you will need to obtain an insurance certificate which specifies your new lender as the ‘interested party’ on the policy from the refinance date.  This insurance certificate is submitted to your new lender along with the executed loan agreement prior to the refinance date.

     7. Cash Contributions

Many lenders offer cash incentives for refinancing, which can range from a few thousand dollars (e.g., a $5,000 cash contribution) depending on the loan size and lender policies. These contributions are typically paid into your nominated bank account following completion of the refinance.

However, such incentives often require you to remain with the bank for a specified period (e.g., three years), and leaving early will trigger a repayment obligation. Always review the terms before accepting an offer.

8. Completing AML (Anti-Money Laundering) Compliance

Lenders and legal professionals must complete AML checks before proceeding with refinancing. This includes:

• Providing proof of identity (passport, driver’s licence)

• Verifying address details (utility bill, bank statement)

• Confirming the source of funds used in the transaction

9. Refinancing Costs & Disbursements

Refinancing involves several costs, including:

• Legal Fees – Solicitor fees for handling the mortgage discharge and registration, including title and Guaranteed Title Search (GTS) fees.

• Lender Fees – Application fees, valuation fees, and settlement fees charged by the lender.

• LINZ Fees – Government charges for mortgage registration and discharge, including pre-settlement discharge and post-settlement registration fees.

Final Thoughts

Refinancing can be a beneficial financial move, but it requires careful planning and execution. By understanding the process, risks, and associated costs, borrowers can ensure a smooth transition to a better mortgage structure. Always seek legal and financial advice to tailor your refinancing strategy to your specific needs.