Refixing vs Refinancing Your Mortgage
🔁 The Difference Between Refixing and Refinancing
Most New Zealand mortgages are split into fixed-rate chunks that expire every year or two, so every mortgage holder regularly faces the same moment: the rate is about to roll over, and you have to decide what to do next. Two words come up, refixing and refinancing, and they are often confused. They are not the same thing, and knowing the difference can be worth thousands of dollars over the life of your loan.
Refixing in a Nutshell
- Same lender: You stay where you are and pick a new fixed or floating rate.
- No legal work: There is no new loan to set up, so no solicitor and usually no fees.
- Fast: It can be done in minutes, often before your term even ends.
Refinancing in a Nutshell
- New lender: You move the mortgage to a different bank.
- An application: The new bank reassesses your income, expenses and the property.
- Some cost and reward: There is legal work to discharge the old loan and register the new one, but the new bank often offers a cash contribution to win your business.
📌 When to Refix
The Easy, Sensible Default
Refixing is the natural choice when your current bank is offering competitive rates, you are happy with their service, and you do not want the effort of switching. For most people, most of the time, a well-negotiated refix is perfectly good.
Always Negotiate Your Refix
Here is the part many people miss: the rate your bank first offers when you refix is often not its best. Banks frequently shave a margin off the advertised, or carded, rate if you ask, especially if you have a good record or mention you are considering other lenders. A short conversation can lower your rate for the whole term.
Choosing Your New Term
Refixing also means choosing how long to fix for. A shorter term lets you react sooner if rates fall, while a longer term gives certainty. Many people split their loan across more than one term so not all of it rolls over at once, smoothing the risk of refixing everything at a high point.
Use our Mortgage Calculator to compare repayments at different rates and terms, and the Breaking a Fixed Mortgage guide if you are mid-term.
💰 When to Refinance
Reasons to Move Banks
- A clearly better rate: If another lender is meaningfully cheaper and your bank will not match it, switching can save real money.
- Cash contributions: New banks often pay a cash contribution, sometimes a few thousand dollars, to win your mortgage. This can more than cover the switching costs.
- Better structure or features: You might want an offset account, revolving credit, or different flexibility your current bank does not offer well.
- Poor service: Sometimes the reason is simply that you are unhappy with your bank.
The Costs and the Catches
Refinancing is not free. You will usually pay legal fees to discharge the old mortgage and register the new one. If you break a fixed term early to switch, a break fee may apply when wholesale rates have fallen. And the cash contribution comes with a clawback condition.
| Factor | What to know |
|---|---|
| Legal fees | To discharge and register the mortgage |
| Break fee | May apply if you leave a fixed term early |
| Cash contribution | Offered by the new bank, often a few thousand dollars |
| Clawback | You usually repay the cash contribution if you leave within a few years |
Do the Maths
The right call is whichever leaves you better off after all costs. Add up the savings from a lower rate over the term, plus any cash contribution, then subtract legal fees and any break fee. If you are clearly ahead, refinancing makes sense; if it is marginal, refixing and negotiating may be simpler and just as good.
✅ Common Mistakes and What to Do
Mistake 1: Taking the First Refix Rate
The trap: Clicking accept on the bank's first offer without asking for better.
Why it costs: The carded rate is often not the best the bank will do. A quick negotiation can lower it, saving money on every repayment for the term.
Mistake 2: Switching for Cash, Then Paying It Back
The trap: Chasing a cash contribution and refinancing again before the clawback period ends.
Why it costs: You have to repay the contribution if you leave too soon, wiping out the gain and the effort. Only switch when you plan to stay.
Mistake 3: Ignoring Break Fees
The trap: Refinancing mid-fixed-term without checking the break fee.
Why it costs: A break fee can be large when wholesale rates have dropped, easily swallowing the savings. Get the figure before you commit.
Mistake 4: Letting It Roll to Floating by Default
The trap: Doing nothing, so the loan drops onto the higher floating rate when the fixed term ends.
Why it costs: Floating rates are usually higher than fixed. Letting it default there, even briefly, costs more than actively refixing.
A Simple Action Plan
Where to Go Next
Use the Mortgage Calculator to compare scenarios, the Mortgage Repayment Calculator for repayments, and the Breaking a Fixed Mortgage guide for break fees.
Final word: Refixing keeps you with your bank on a new rate, quick and free, while refinancing moves you to a new lender for a better deal, cash contribution or features, at some cost and effort. Always negotiate your refix, do the full maths before refinancing, watch break fees and clawbacks, and never let your loan drift onto floating by default. A little attention each time a term rolls over keeps your mortgage working hard for you. This is general information, not personalised lending advice, so talk to a mortgage adviser for your own situation.
🎯 Test Your Knowledge
Quiz on Refixing vs Refinancing (20 Questions)
Related guides
- Refixing Your Mortgage, a related guide in the same area.
- Refinancing and Mortgage Restructuring Guide, a related guide in the same area.