Mortgage review

[thegreatgospel]

Kia Ora,
We have a mortgage of just over $150k

We bank with a building society and currently pay $1,100 a fortnight @ 4.85% (significantly over principle)

Options to refix are
One year 7.90% - $606 ish per fortnight
Two years 7.75% - $599 per fortnight
Variable 9.0% - $660 per f/n

Personally I’m a hard no on two years, so weighing up between one year and variable.

Variable is what I’m leaning towards as I think rates will drop, and know we can lock in or remortgage with another bank if they don’t.

For context, we are doing okay financially so making the payments isn’t the issue, it’s paying down as fast as we can. Additionally we are more than halfway through a subdivision which will zero out our mortgage (and some) when one of the titles sells.

Soooo, would love to hear thoughts between one year and variable for our situation.
Ngā mihi

 

[leyefajo]

@thegreatgospel If you have to go with one of those, go with the 1 yr unless you think you would get rates that are 3% lower within 6 months.

However, the right answer is to refinance your loan (sell it to a new bank). 2 yr rate of 6.89% offered by a few of the main banks is way better. Might when get some cashback, though not a lot aw your mortgage is small

 

[cbonetwobe]

@leyefajo One point against the cashback... There is a clawback clause triggered if the mortgage is repaid in the subsequent three to four years.

 

[leyefajo]

@cbonetwobe Good point, I guess do the maths and work out the max you can repay as extra so that you see out that time, or just accept the clawback assuming it is less than the cashback itself

 

[cbonetwobe]

@leyefajo Another option is to do a revolving credit and leave it open with zero balance until after the deadline.

It's been a while since I had a revolving credit, but my memory is that every month the 'balance available' drops by the required payment amount.

 

[ashleyh0910]

@thegreatgospel Will depend on when you expect to have the subdivision finished. If rates go down as you expect, and you finish the subdivision part way through a fixed term, you will have to pay an early repayment fee which could be significant if you were to fix for two years. Six months or variable might be your only options depending on timing. Mainstream bank definitely

 

[thegreatgospel]

@ashleyh0910 Good point thank you. Thinking subdivision will be complete this year to title but then obviously have to sell it. I will shop around I think. Just looking at ASB and ANZ but the pain of shifting might not be worth a .4 difference in a year fixed term?

 

[blackz911]

@thegreatgospel Honestly shifting banks is easy. We are still new to mortgages and home ownership but we changed banks at our second refix because our bank would not budge.

We had a cashback offer so we gained money by moving even after lawyers fees (our lawyer was around $1100). Our mortgage is larger than yours however so the cashback was more.

Have you looked at Offset? You would still be on a variable rate but your payments will be on the principle (if you are in a lucky position to be 100% offset even better). This will give you flexibility about the subdivision sale too.

 

[phegnomenal]

@thegreatgospel 6 months 100k* of it. Floating mortgage the other 50k I reckon. Bust ass to get that floating down to $0 in the 6 months. Then when the 100k opens up you can do the same on time

 

[thanksgod]

@thegreatgospel Mortgage of $150k?. Just go back to sleep.