Receiving multiple refinancing offers from different banks is excellent—it means you have options and negotiating power. However, comparing these offers effectively requires looking beyond headline interest rates to understand total costs, features, restrictions, and long-term value. Banks structure offers differently, making direct comparisons challenging unless you know what to examine and how to calculate true costs over realistic timeframes.
This comprehensive guide explains how to compare refinancing offers systematically, shows you how to calculate total cost of borrowing across different offers, helps you evaluate features and flexibility beyond just rates, identifies hidden costs and restrictions to watch for, and provides frameworks for making confident decisions when choosing between competing offers.
Systematic comparison prevents you from overlooking important factors or being swayed by impressive but ultimately less important features.
Create a spreadsheet listing all offers you've received with columns for lender name, headline interest rate, loan term options, application fees, annual account fees, valuation costs (if applicable), legal fees (if applicable), estimated break fees (if switching from fixed terms), cashback or incentives offered, key features (offset accounts, redraw, etc.), and any restrictions or conditions.
This visual comparison makes it easy to see differences at a glance rather than juggling multiple documents and trying to remember details.
Ensure you're comparing equivalent loan structures across all offers. All offers should be for the same loan amount, same loan term, and comparable fixed versus floating splits if you're splitting your loan. Request quotes for identical scenarios so comparisons are genuine apples-to-apples rather than comparing different products.
Before analyzing offers, clarify what matters most to you. Is your priority the absolute lowest interest rate regardless of other factors? Do you value flexibility and features like offset accounts or unlimited extra repayments? Is minimizing upfront costs important due to limited cash reserves? Do you want a lender with excellent customer service and digital banking?
Understanding your priorities helps you weight different offer aspects appropriately rather than being paralyzed by too many variables.
Interest rates are crucial but require careful interpretation to compare meaningfully.
Some offers might quote fixed rates while others quote floating rates. These aren't directly comparable. Fixed rates lock in for specific periods (typically one to five years) while floating rates vary with market conditions.
If comparing fixed and floating offers, consider your rate certainty preference, your view on whether rates will rise or fall, and whether you want flexibility to make extra payments (easier with floating).
New Zealand doesn't mandate comparison rates like Australia does, but you can calculate them yourself. Comparison rates represent the true cost of borrowing including fees, not just the interest rate. A six percent rate with eight hundred dollars in annual fees has a higher comparison rate than six point one percent with no fees.
Calculate total interest plus all fees over your intended loan period, then determine what single interest rate would equal this total cost. This reveals the true cost difference between offers.
When comparing fixed rate offers, ensure you're comparing equivalent terms. A two-year fixed rate at five point eight percent isn't directly comparable to a five-year fixed rate at six point one percent—you're accepting different rate certainty periods.
Compare offers for the same fixed term length you actually want rather than mixing different term lengths in your comparison.
Some offers include special promotional rates for initial periods—perhaps exceptionally low rates for six or twelve months before reverting to standard rates. Calculate what your average rate will be over a meaningful period (say three years) rather than being swayed by short-term promotional rates.
A lender offering five point five percent for twelve months then six point three percent thereafter might cost more over three years than a lender offering consistent five point nine percent throughout.
Fees significantly affect total borrowing costs and vary substantially between lenders.
These upfront fees range from zero to eight hundred dollars or more. Some lenders charge no application fees, particularly during promotions. Others charge standard fees but might waive them for strong applications or during negotiations.
Don't dismiss offers with higher application fees without calculating total costs—a lender with six hundred dollars in application fees but zero annual fees might cost less over time than a lender with no application fee but two hundred dollars annual fees.
Annual or monthly account-keeping fees accumulate substantially over loan terms. A lender charging fifteen dollars monthly costs one hundred and eighty dollars annually, or four thousand five hundred dollars over twenty-five years.
These ongoing fees often receive less attention than rates but significantly impact total costs, particularly for long-term loans.
Some lenders include valuation costs in their fees while others charge separately. Similarly, legal fees might be covered by the lender or charged to you. Ensure you know total upfront costs including all third-party fees, not just lender fees.
Sometimes lenders offer to cover legal or valuation costs as incentives. Include these savings in your total cost comparison.
If you might want to refinance again or sell your property before your fixed term expires, understand potential break fees. Some lenders calculate break fees more favorably than others. While you can't know exact future break fees, lenders can explain their calculation methodologies.
Also check whether there are any exit fees if you repay loans early or switch lenders after a certain period. Some lenders impose restrictions preventing refinancing away from them for minimum periods.
Features affect your borrowing experience and costs beyond headline rates.
Offset accounts link to your mortgage, with balances offsetting your mortgage balance for interest calculation purposes. If you have a mortgage of five hundred thousand dollars and fifty thousand in an offset account, you only pay interest on four hundred and fifty thousand dollars.
Offset accounts can save thousands annually in interest for borrowers who maintain savings. If one lender offers offset accounts while another doesn't, calculate potential interest savings to compare true value.
Not all offset accounts are equal—some offer full offset (one hundred percent) while others offer partial offset (fifty percent or less). Understand the specific offset percentage when comparing.
Redraw facilities allow you to access extra payments you've made beyond required repayments. This provides flexibility to pay down mortgages aggressively while maintaining access to funds if emergencies arise.
Check whether redraw is free or charged per transaction, whether there are minimum redraw amounts, and how quickly you can access funds (some allow instant online redraw while others require applications).
Fixed-rate loans typically restrict extra repayments to certain percentages of the original loan amount annually—commonly ten to twenty percent. Some lenders are more generous than others with these limits.
If you plan to make substantial extra payments to reduce your mortgage faster, choose lenders with higher extra payment allowances or consider larger floating portions of your loan.
Portable mortgages can transfer to new properties if you sell and buy, avoiding break fees when moving homes. This feature is valuable if you might relocate before your fixed term expires.
Not all lenders offer portability, and those that do have specific conditions about timing and property types that qualify.
Some lenders offer rate locks allowing you to secure quoted rates for certain periods while your application processes. If rates rise during application processing, you're protected. This feature is valuable in rising rate environments.
Understand how long rate locks last and whether there are fees for this protection when comparing offers.
True offer comparison requires modeling total costs over realistic timeframes.
Calculate first-year costs including all upfront fees (application, legal, valuation), interest for the first year based on quoted rates, and any ongoing fees for the first year. This reveals which offer is cheapest in the short term, important if you might sell or refinance again soon.
Model costs over three years assuming rates remain constant, including all fees over this period. This medium-term view is realistic for many borrowers who maintain mortgages for several years before life changes prompt new refinancing.
Include estimates of any cashback or incentives received in your calculations, as these offset costs.
Calculate costs over your full intended loan term—twenty-five or thirty years for most borrowers. This long-term view shows which offer delivers best value if you maintain the mortgage indefinitely.
However, recognize that rates won't remain constant over decades, so this is more theoretical than short and medium-term comparisons.
Identify when offers break even relative to each other. Perhaps Offer A has higher upfront costs but lower ongoing rates compared to Offer B with lower upfront costs but higher rates. Calculate when the cumulative savings from lower rates in Offer A exceed the higher upfront costs, revealing your break-even point.
If you're confident you'll maintain your mortgage beyond the break-even point, choose Offer A. If you might refinance or sell before breaking even, Offer B might be better.
Beyond financial terms, lender quality affects your borrowing experience.
Research lender customer service quality through online reviews, Consumer NZ reports, and feedback from friends or family. Poor service creates frustration and wastes your time, potentially costing you more than modest rate differences save.
Consider whether lenders offer dedicated relationship managers, responsive helpdesks, or primarily automated service with limited human contact.
Evaluate online and mobile banking platforms for ease of use, availability of features like online extra payments or redraw, and quality of financial reporting and tracking tools. Strong digital capabilities make mortgage management convenient and provide clear visibility of your loan status.
During your application process, notice how efficiently lenders process your application. Do they respond quickly to queries? Is documentation handling smooth? Are there unnecessary delays or requests for redundant information?
Application experience often reflects overall lender competence and predicts your ongoing experience.
While all registered New Zealand banks meet regulatory requirements, some are more established and stable than others. Particularly with smaller lenders, consider their financial stability and longevity. You want lenders who'll exist throughout your loan term without being acquired or failing.
Every offer includes conditions and restrictions that affect value and suitability.
Offers might be conditional on maintaining certain LVRs. Premium rates might only apply to borrowers with LVRs below seventy percent, with higher rates for higher LVRs. Ensure offered rates apply to your specific LVR rather than assuming they're available regardless of equity position.
Some offers exclude certain property types—units, properties on leasehold land, properties in specific locations, or properties above certain values. Verify that attractive offers apply to your specific property rather than learning during application that they don't.
Offers might assume standard employment income. If you're self-employed, on contract, or have non-standard income, confirm that quoted rates remain available for your employment situation rather than assuming they do.
Particularly for premium rates or special offers, lenders might impose minimum loan amount requirements. If refinancing smaller balances, ensure offers genuinely apply to your loan size.
With comprehensive comparison complete, make your final selection confidently.
Return to your initial priorities. If lowest rate is paramount and you're comfortable sacrificing features or convenience, choose the lowest-rate offer that meets minimum requirements. If you value features and flexibility, accept slightly higher rates for superior offerings.
If service quality matters greatly due to past poor experiences, prioritize lenders with excellent service reputations even if not the absolute cheapest.
Before final decisions, clarify any remaining uncertainties directly with lenders. Ask specific questions about features, fees, or conditions that affect your comparison. Ensure you fully understand what you're committing to rather than making assumptions.
Use competing offers as leverage for final negotiations. If one lender's offer is almost but not quite as good as another's, ask if they'll match or better the competing offer. Many lenders have some flexibility to improve terms when they know you're seriously considering competitors.
If working with mortgage brokers, consider their recommendations carefully. Experienced brokers understand nuances beyond numerical comparisons—lender reliability, processing efficiency, and likelihood of smooth settlements.
While making final decisions yourself, weight professional advice appropriately rather than dismissing recommendations that don't align with your initial preferences.
At Luminate Financial Group, we help New Zealand homeowners compare refinancing offers by creating comprehensive comparison analyses showing total costs over multiple timeframes, identifying features and restrictions that affect value beyond rates, providing independent assessments unconstrained by lender relationships, and offering professional recommendations based on experience with how different lenders actually perform.
Our comparison services ensure you understand all offers thoroughly and choose based on complete information rather than being swayed by impressive but ultimately less important aspects of particular offers.
Received multiple refinancing offers and need help comparing them objectively? Contact Luminate Financial Group for comprehensive analysis. We'll help you understand true costs, identify best value, and make confident decisions that genuinely serve your interests.