Did you buy with a small deposit? Refinancing could save you thousands
Thanks to the state of the property market in Auckland, many Kiwis have to buy their first or even second homes with a smaller deposit. That’s fair enough too – a 20% deposit for the average property in the supercity is over $175,000.
Unfortunately, when you buy with a deposit lower than 20 per cent of the homes value, you’ll get hit with a number of extra fees by most lenders. Luckily, there’s a solution that could save you thousands.
The problem with low-deposit loans
If you bought with a low deposit and have owned your home for a while, you may be paying more interest than you need to.
When you first bought, your lender most likely charged you a higher-than-market interest rate to cover the extra risk of you defaulting (low-deposit borrowers are deemed to be higher risk). Your interest rate could be as much as 0.25% to 1% higher than market.
To give you an idea of how much of a difference that could make, here’s an example. Over the life of a 25 year loan term on the average Auckland property, an interest rate just 0.5% lower would save you over $85,000.
Fix the problem by refinancing
If you’ve built up at least 20% of equity in your property through capital gains or paying down your mortgage, you should consider refinancing. You are no longer a low-deposit borrower, which means you should be able to find a loan with a lower interest rate.
Using a mortgage broker for this is wise. The good ones often have access to the lowest rates on the market, which means you could save even more.
Ready to get started? Get in touch with the expert Mortgage Advisers here at Money Empire. We’ll take the time to understand your financial situation and your current loan, then help you weigh the costs of refinancing against the benefits to make sure you come out ahead.
