Home Loans

Do You Want to Break Your Mortgage?

With all the talk surrounding interest rates and the Government and Reserve Bank forecast over the next few years, we thought it was timely to touch on the options for breaking your mortgage.

What does it mean to “break your mortgage”?

Breaking your mortgage means ending your current fixed mortgage term before it comes up for renewal. The main reason people break their mortgages early is to secure a better interest rate.

Doing so can save you money in the long term, but you need to weigh up your options. This is where we step in. We can contact the bank on your behalf to find out about break fees, any cashback repayments and advise if breaking your existing mortgage would be in your best interest.

The low down on break fees

Each bank has a different process for working out the break fee, but generally, they will base it on:

  • The amount you have left on your mortgage
  • The timeframe left on your fixed rate
  • Your interest rate
  • Your mortgage term

Break fees are subject to change daily, and the bank may also charge an administration fee. Once we have the break fee amount, we can run the numbers to see if it’s worth switching interest rates or not.

Interest rates and long-term thinking

Though no one has a crystal ball, it has been forecast that interest rates will rise, possibly around the middle of next year. For most of our clients, we recommend a longer-term mortgage fix (like a three to five-year term) to create some security, especially with COVID and its impact on the economy.

If you are on the fence about the best way to protect yourself from the rise in interest rates, we are more than happy to evaluate your situation and advise the best course of action.

Written by Reuben Herries and Amanda Morris-Jenkins (pictured above) from the home loan team at Finsol Hawke’s Bay.

While we’re home loan and insurance experts, our blog posts are for general information purposes only and are not intended as financial advice. If at any stage you need personalised advice, get in touch on 0800 346 765, or email finsol@finsol.co.nz.


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