Mortgage Question

Hey Stacey. I'm not 100% sure but a friend of mine just tried to change things around mid-way through the term and was quoted a penalty / admin free of $650!!!!!!!

DH works for ASB and we had our mortage on a fixed 2 year rate (was fixed earlier in the year when the rates were really high). We have refixed our mortage at the new interest rate yesterday- we had to pay a penatly of $1600 (yes I was shocked at how much the penatly was), but the gain that we get having changed far outweighted the charge.

I know the penalties are based around how big the loan is. Ours isn't that huge at 160k. But just moving from 8.2% to 9% which we did in june added $55 a fortnight to our repayments so it's really going to be a case of if we will be better off.

Stacey we have recently looked into changing to Kiwibank, but it was going to cost us a fortune to break one of our fixed term rates. We have our mortgage split and 50% of it has just come up this week for re-fixing. I was pleasently surprised to hear today we managed to re-fix at 7.94%. Not what we did have it at, but still better than the 8% + rates they have been offering!

Must admit though our mortgage is a fairly decent figure!

I'll be doing that trick too. I did that in June when our mortgage came up, said I was switching and they almost matched what I wanted.

yes if your fixed rate is higher than whats on offer you will pay a penality - if you were on 9% and want to change to 8% you will pay - the other way around there is no penalities.

I think the formula for working out the penalty should be written in the terms and conditions of your loan. You would have got given that by the bank when you signed up. Although in saying that, I got DH to look for it the other day for the same reason as you and he couldn't see it in ours. Might have been a boy look though so I've asked him to send me a copy of them. I think its worked out as a function of the difference between the rate its fixed on and the new rate, and the total amount owing but i'm not sure how. It might possibly also be affected by how long you have left on your term. If you do find out the formula, please share .

ETA: turns out google is your friend... I found this:
http://www.kiwibank.co.nz/about/pdf/home_loan_tac.pdf (sorry, don't know how to post a link). Scroll down to page 13. Good luck finding the necessary details! It will be pretty similar between banks I'd expect.

Edited by T_Rex

I just had a read too. Its not looking worth the charges IMO.

I used to own a place in Akl and had the same prob. I went shopping around to other banks and it was surprising how many of them would assist in the costs of changing over just to get the business. It depends how desperate they are to get your business and with the market slowing, you might be in a good position to negotiate with a new lender. I was with Nat bank but they're costs have gone through the roof ever since ANZ took over. We'll be going with Kiwibank next time round which is hopefully next year.

Think outside the box. Just because one bank says no, doesn't mean the next one wills say the same thing. You're the customer. Mortgages are tailored these days so I can't see any reason why you shouldn't be able to find something that reduces your costs. Kiwibank are good and have good rates but my research has found that they're not the most flexible bank whereas the others can be as they're trying to compete with Kiwibank.

I just worked this out for us, using the formula in the link i posted before. It would cost us $5000 to do (the difference between the fee and the interest savings). I think I'll wait it out!