What refinancing means
Refinancing is replacing your existing home loan with a new one, either with a different bank entirely, or renegotiated with your current one. People typically do this to get a better rate, access equity, consolidate debt, or move to a lender with features (offset accounts, revolving credit) that suit them better.
What it costs: the break fee
If you're still inside a fixed term, breaking it early can trigger a break fee. Banks calculate this using roughly the same method:
Worked example: a $500,000 loan fixed at 5.00% with 3 years remaining, broken when the current wholesale rate for that remaining term is 4.00% (a 1.00% gap), costs roughly $500,000 × 1% × 3 = $15,000.
The key thing to understand: this fee only applies to the remaining fixed term, not your whole mortgage. It only exists if rates have fallen since you fixed. If rates have risen since you locked in (see our rates guide), there is typically little or no rate-related break fee, because the bank isn't losing money by letting you go. Ask your current lender for an exact break fee quote before deciding. It's specific to your loan and changes daily with wholesale rates.
Other refinancing costs
| Cost | Typical range |
|---|---|
| Legal / conveyancing fees | $600 – $1,500 |
| Disbursements (LINZ registration, title search, courier) | $100 – $400 |
| Valuation (desktop to full registered) | $0 – $1,000+ |
| Application / establishment fee | $0 – $800 (often waived or covered by cashback) |
Altogether, standard refinancing (excluding any break fee) typically runs $800–$2,900 in upfront costs. Many banks offer a cashback specifically to offset these. See our cashback guide for how that works and its own catch.
Step-by-step: How refinancing actually works
- Check your numbers first. Get an exact break-fee quote from your current bank (if still fixed), and compare today's best available rate for your situation. MyRateCheck's calculator does this in one step.
- Compare the net position. Weigh the rate saving over your intended term against the break fee, legal costs, and any clawback risk from your existing cashback (if you received one when you last switched).
- Get pre-approval with the new lender or through an adviser, who can often access rates sharper than the publicly advertised ones.
- Instruct a lawyer to handle the discharge of your existing mortgage and registration of the new one. This is a standard, routine process for conveyancing firms.
- Settlement. Your new lender pays out your old loan, any cashback is paid after settlement, and your new rate and repayments begin.
Is refinancing worth it?
A simple rule of thumb: Work out how many months of lower repayments it takes to recover your total switching costs (break fee + legal + valuation, minus any cashback). If that payback period is well within how long you plan to stay in the loan and not move again, refinancing is usually worth it. If you're likely to move house, sell, or refinance again within a year or two, the maths gets tighter. Always run the numbers before committing.
Run your own numbers
Rather than estimating, enter your actual balance, rate and remaining term into the free MyRateCheck calculator. It compares your current loan against today's best rate and shows the effect of cashback, so you can see the real net benefit before you talk to anyone.
Related reading: NZ mortgage rates guide, cashback explained, or the FAQ.