Step 1| Obtain Loan Approval
The first step in the process is to obtain a new offer of finance or loan approval. You’ll need to answer basic mortgage application questions and provide proof of your income, assets and employment to show you can afford or service the new loan commitments.
It pays to consider how you best go about obtaining this offer i.e. whether you engage a mortgage broker or discuss terms with your existing or new lenders yourself.
The main point to note is that even when interest rates go down, your bank won’t automatically offer you the better deal. You will need to shop around to see what’s available and go after it.
Sites like interest.co.nz and moneyhub.co.nz show rates from different lenders across New Zealand.
Note: if you’re on a fixed rate mortgage and considering breaking your contract, you need to find out from your bank what they would charge you as a break fee. This is important as you need to compare this cost against the benefits of a new mortgage, to see if taking another deal is worth it. You can ask for your break fee to be emailed to you so you have it in writing.
Step 2 | Loan Contract Execution
Once you have determined which offer is best for, you will need to formalise this offer with an application and advise the Lender whom your Solicitor is. The Lender will then send its loan documentation to your solicitor. At this point, your Solicitor should get in touch and arrange a meeting to confirm when settlement will occur and execute:
the loan contract;
Land Information New Zealand Authority and Instruction Form (authorizing your Solicitor to register a new mortgage over your property);
Before settlement, you will also need to contact and advise your insurance provider who your new Lender is and the date settlement is occurring. Ask them to forward a copy of the Certificate of Currency to your Solicitor.
Step 3 | Settlement Phase
Provided you have executed the above paperwork and provided a copy of the Certificate of Currency, there is nothing for you do on the actual settlement date.
It is a different story for your Solicitor. On the settlement date, he/she will:
have obtained authority from your existing Lender to discharge its mortgage over your property and repay outstanding loan amounts; and
upon receipt of loan funds, repay the outgoing Lender, discharge that mortgage and register a new mortgage over the property; then
report to both the outgoing Lender and new Lender.
overview of the main steps to settle your next transaction; as well as
a detailed break down of the main considerations at each step along the way,
Step 4 | Post Settlement
Your lawyer will provide a full report to you:
highlighting the movement of funds in and out of their trust account;
enclosing your outgoing lenders' settlement statement breaking down how the final settlement figure was calculated; and
enclosing their Tax Invoice highlighting both their fees, disbursements and any reasonable office expenses.
If you haven’t yet obtained a fee estimate, you can obtain an instant estimate of fees by trying our automated online fee calculator here.