How to choose the right moment to restructure a mortgage?

Written by Money Empire

October 15, 2018

There are many reasons to consider restructuring a mortgage, as what may have worked at one point won’t necessarily be the best fit later on down the line. When it comes to home loans, it’s important to have something that works for you. With these choices carrying the power to influence how many thousands you could save in interest, or years spent paying off loans, knowing when the moment is right to restructure is vital.

Fixed rate loan expiry

Sometimes the choice to restructure is necessary. For example, when a fixed interest loan is coming up to its expiry date, sorting out a restructure is in your best interest. Literally.

Not doing anything generally means that the loan reverts to the lender’s floating rate, which is not always the best option out there. Instead, this is the perfect moment to review what is available, and find something that matches your current needs.

Sometimes restructuring a mortgage can provide you with a loan better suited to your needs.

Personal circumstances

Occasionally, the right moment to restructure arises from conditions that are closer to home. When your personal circumstances change, it can create a positive or negative skew in the debt-to-income ratio. Suddenly, you might not have enough to cover your current mortgage payments. Or, on the flip side, the chance to increase them and reduce the loan period may have arisen, but your current mortgage doesn’t allow you to make extra payments.

In both these scenarios, debt restructuring is a way to bring your mortgage payments back in line with what you as a borrower can afford. However, be aware of any possible costs involved, such as break fees for fixed-rate loans. If the term on it is coming to an end soon anyway, it may be a wiser choice to wait until this rolls around to avoid the extra cost.

Outside influences

The RBNZ has announced that it expects to keep the OCR at 1.75 per cent till 2020.

Keeping an eye on what is happening in the economic and real estate markets is important as well, as these can influence when you might want to restructure a mortgage. For example, recently the Reserve Bank of New Zealand (RBNZ) has announced that it expects to keep the Official Cash Rate (OCR) at 1.75 per cent till 2020, which creates a flow on effect to interest rates offered by lenders. Being aware of these changes, or engaging the services of someone who can advise you on them, allows you to know when a restructure is in your best interest.

When choosing to restructure a mortgage, make sure you have someone on your side that can help you get the best deal available. Here at Money Empire, we pride ourselves on giving neutral advice, which means that you know we won’t be giving you options that don’t actually suit your current situation. If now is your right moment to restructure your mortgage, let us support you in finding the best solution possible.

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