You want a straight answer: will your repayments drop if you remortgage? Sometimes yes, sometimes not at all. It depends on the rate you can get, the time left on your loan, whether you extend that term, and if you roll in fees or extra borrowing. I live in Auckland and see this play out every week-two people on the same balance can walk away with very different outcomes.

  • Your payments fall if your new rate is lower and you keep your remaining term the same. They can also fall if you extend your term-but you’ll likely pay more interest across the life of the loan.
  • Your payments rise if your rate is higher, you shorten your term, or you borrow more (top-up, debt consolidation, renovations).
  • As a quick rule: on a 30-year mortgage, each 1% change in rate moves the payment by about $54 per month per $100k. On a 25-year term, about $60 per month per $100k.
  • Fees matter: break costs, legal, valuation, registration, and any cashback clawbacks can offset savings-especially if you roll them into the loan.
  • Before you switch banks, ask your current lender to match. If they come close, you might save the hassle and some fees.

What actually changes your payments when you remortgage

The word “remortgage” gets used loosely. In New Zealand, people say remortgage for two things: refixing with your current bank, or refinancing to a new bank. Both can change your repayments, but not in the same way. Here’s what really moves the dial on remortgage payments:

  • Your new interest rate: This is the big one. Lower rate = lower payment, if you keep the same remaining term and balance. Higher rate = higher payment. Simple, but not the whole story.
  • Your remaining term: Keep the term the same and you can compare apples with apples. Extend the term (say from 25 to 30 years) and your payment drops, but you likely pay more interest over time. Shorten the term and your payment rises, but you’ll be debt-free quicker.
  • Your balance: If you add to your loan-paying fees into the mortgage, topping up for a car, consolidating credit cards-your payment can rise even if your rate falls.
  • Fees and incentives: Early repayment costs (break fees) if you leave a fixed rate early, legal and valuation costs, mortgage registration/discharge fees, plus cashback offers and their clawback periods. The Reserve Bank of New Zealand (RBNZ) allows break costs when you break a fixed rate; the exact amount depends on wholesale rates at the time you break. Most big NZ banks also offer cashbacks for bringing your lending across, but they’ll claw these back if you leave within roughly 2-4 years.
  • Your loan structure: Interest-only periods, split loans (e.g., part fixed, part floating), and offset/redraw features change the way your payment behaves. For example, moving from interest-only to principal-and-interest will increase the payment from day one.

Put simply: payments go down when the maths says they should-lower rate, same term, same balance. Everything else either helps or hurts that core equation.

Quick math: how to estimate your new repayment in minutes

You don’t need a finance degree to sanity-check a remortgage quote. Use these shortcuts and you’ll be within a few dollars.

  1. Grab four numbers:
    • Loan balance (today)
    • Remaining term (years)
    • Current interest rate
    • Quoted new interest rate
  2. Apply the rate-change rule of thumb:
    • 30-year term: ~ $54 per month per $100k per 1% rate change
    • 25-year term: ~ $60 per month per $100k per 1% rate change

    Example: $500k balance, 30-year term, rate drops 1%. Payment falls by roughly 5 × $54 = $270/month. If the drop is 0.7%, multiply by 0.7 → about $189/month.

  3. Adjust for term changes:
    • Extending 25 → 30 years often trims ~6% of the payment at the same rate.
    • Shortening 25 → 20 years often adds ~12-15% to the payment at the same rate.

    These are ballparks. A mortgage calculator will give you exact numbers, but this gets you close fast.

  4. Layer in fees if you’re rolling them into the loan:

    Every extra $1,000 added to a 25-30 year loan adds about $6-$7 per month to the payment, depending on the rate. So $3,000 in fees increases your monthly by roughly $18-$21.

Common NZ fees to keep in mind (ranges gathered from typical bank schedules and conveyancers in 2024-2025):

  • Early repayment cost (breaking fixed early): variable; can be zero or several thousand depending on wholesale rate movements
  • Discharge/settlement fee (old bank): ~$100-$400
  • Mortgage registration with LINZ: usually a modest government fee
  • Valuation (e.g., e-Val vs full valuation): ~$200-$1,200 depending on property and lender requirements
  • Legal/conveyancing: ~$900-$1,800 depending on complexity
  • Cashback: often $2,000-$5,000+ for larger loans; clawback if you leave early (check your letter of offer)

One more NZ wrinkle: banks assess affordability at a “test rate” higher than your actual rate to make sure you can handle rate rises. That affects approval, not your current repayment, but it can limit your ability to extend the term or add to your loan. Expect a higher test rate in the background during the application.

Real NZ scenarios: when payments drop, stay flat, or go up

Let’s run the numbers on a few clean examples. These are hypothetical and rounded for clarity.

Baseline: $600,000 balance, 25 years left, current rate 7.00%. Monthly payment ≈ $4,242.

Scenario Assumption New Monthly Payment Change vs Baseline What this means
Lower rate, same term 6.30%, 25 years ≈ $3,982 −$260 Rate drop of 0.7% saves about $260/month
Same rate, longer term 7.00%, 30 years ≈ $3,993 −$249 Extending from 25 → 30 years trims payment but adds total interest
Lower rate, fees rolled in 6.30%, 25 years, +$3k fees ≈ $4,001 −$241 Rolling fees into the loan blunts the savings by ~ $19/month
Lower rate, top-up $40k 6.30%, 25 years, $640k balance ≈ $4,247 +$5 Extra borrowing cancels out the rate savings
Lower rate, shorter term 6.30%, 20 years ≈ $4,402 +$160 You pay it off faster; monthly is higher, lifetime interest lower

Notice what’s going on:

  • A moderate rate drop helps, but not if you add a big top-up.
  • Term changes move payments a lot. Extending reduces the monthly, shortening increases it-even at a lower rate.
  • Rolling fees into the loan nudges the payment up a bit compared with paying fees from savings.

What about debt consolidation? If you fold a $20k credit card into the mortgage, your monthly outgoings might look cheaper on paper. But you’ll likely pay far more interest across 20-30 years unless you keep making the same higher payment and shave years off the loan. If you consolidate, lock in a plan: either maintain your old combined payment or set a shorter split just for that portion.

Investors often ask whether interest-only keeps payments lower. Yes-interest-only is the lowest monthly outlay, but it’s also the slowest way to build equity. Lenders in NZ cap interest-only periods and typically price them differently. If your interest-only period ends during a remortgage, expect a step-up in repayment when you move back to principal-and-interest.

Checklist, pitfalls, and tactics to cut your payment safely

Checklist, pitfalls, and tactics to cut your payment safely

Here’s a tight plan to chase a lower payment without stepping on rakes.

Checklist (do this first)

  • Get your current details: balance, remaining term, current rate(s), and any fixed-rate expiry dates.
  • Check your LVR (loan-to-value ratio): rough value vs loan balance. Under 80% LVR improves options; under 60% can sharpen pricing further with some lenders.
  • Ask your bank for a retention offer: rate, cashback (if any), and what they’ll do on fees. Get it in writing.
  • Get a comparison from at least two other banks or a mortgage adviser: include rate, fixed term options, cashbacks, and estimated fees.
  • Estimate any break cost if you’re still in a fixed period. Your bank can provide a quote for breaking on a certain date.
  • Decide your goal: lowest monthly payment, lowest total interest paid, or flexibility (offset, redraw, split structure).

Smart tactics

  • Keep the remaining term the same if your aim is a true payment drop from a lower rate. Extending term lowers payments, but don’t confuse that with rate-driven savings.
  • Split the loan: A blend of short and longer fixed terms can smooth risk. If rates fall, the short piece rolls sooner; if they rise, the longer piece gives you cover.
  • Use offset if it fits: If you hold chunky cash balances, an offset facility can lower interest cost while keeping money liquid. Several NZ banks offer this on certain products.
  • Don’t over-borrow just because it’s easy: Topping up for non-essentials often eats the payment savings you were chasing.
  • Pay fees from savings where possible. Rolling fees into the loan raises your payment and lifetime interest.
  • Negotiate-properly: Quote a real competing offer (rate and term), mention your LVR, and ask for the lender’s best retention rate. Banks sharpen pencils when they know you can move.
  • Watch cashback clawbacks: If you took a cashback 12 months ago with a 24-36 month clawback and now leave, you might owe it back. Sometimes keeping the mortgage with the same bank and simply refixing avoids this.
  • Stress test yourself: Could you still handle payments if rates rise 1-2%? If not, consider a longer fixed period or keeping a buffer in savings.

Common pitfalls (avoid these)

  • Chasing the lowest headline rate while extending the term by years without noticing. Your monthly looks great but total interest balloons.
  • Switching banks for a small rate cut but losing thousands in cashback clawback and fees-net savings vanish.
  • Consolidating short-term debt into a 30-year mortgage and then dropping your payment to the new minimum. You’ll drag that debt for decades.
  • Ignoring break costs on a fixed rate. Ask for a written quote before you make moves.
  • Not matching your fix period to your life plans (sale, baby, reno). Breaking early can be expensive.

Step-by-step: how to remortgage in NZ for a lower payment

Here’s the practical path I’d follow in Auckland or anywhere else in New Zealand.

  1. Time your move: If you’re close to the end of a fixed rate, wait it out unless a big rate drop makes breaking worthwhile. Ask your bank for an early refix window (many will offer rates 30-60 days before expiry).
  2. Get three quotes: Current bank retention, Bank A, Bank B (or an adviser who canvasses several). Ask for exact rates, terms, cashbacks, and a fee estimate. Request pricing based on your real LVR.
  3. Run the math: Use the rule of thumb and then a calculator for precision. Compare same-term, same-balance scenarios first, then test what happens if you extend or shorten the term.
  4. Decide structure: One- to three-year fixes are popular here; longer if you want certainty. Consider splits (e.g., half 1-year, half 2-year) and keep a small floating slice if you plan extra repayments.
  5. Choose the winner: Net everything: rate, payment, fees, cashback, clawback risk, features (offset, redraw), service, and approval likelihood. Don’t ignore the hassle factor if the saving is tiny.
  6. Apply and verify: Expect income and expense checks per CCCFA rules. Provide payslips, bank statements, and details of dependants and commitments. Self-employed? You’ll likely need financials.
  7. Valuation and legal: Your new bank may need a valuation. Your solicitor/conveyancer will handle LINZ registration and settlement. Confirm total costs in writing.
  8. Set the repayment right: Once settled, confirm the repayment frequency and amount. If your goal is to reduce the payment, set it to the new minimum. If your goal is to crush interest, keep the old repayment.
  9. Review annually: Keep an eye on RBNZ OCR decisions, your LVR, and any life changes that affect your plan. You don’t need to move every year, but you should check.

Mini‑FAQ: quick answers to common remortgage questions

  • Do payments automatically drop when I refix with the same bank? No. They’ll change only if your rate, term, or balance changes. If the new rate is lower and you keep the same remaining term, your payment should fall.
  • Will refinancing hurt my credit score? A credit check happens, but in NZ the impact is usually small and short-lived if you manage debts well. Multiple hard checks in a short time can add noise.
  • Can I remortgage if my LVR is above 80%? It’s harder. Some lenders are strict under RBNZ speed limits and internal policies. Your current bank may still refix you; moving banks can be tougher.
  • What if my income is tight under the bank’s test rate? You might not be able to increase the term or add to the loan. An adviser can help find a lender whose assessment fits your situation.
  • Is a cashback worth it? Yes if the rate is sharp and you’re likely to stay through the clawback period. If you think you’ll move sooner, a smaller cashback with a better rate-or staying put-might be smarter.
  • Should I go interest-only to cut payments? It lowers payments, but you won’t reduce principal. Lenders limit interest-only periods. Good for short-term cash flow; not a long-term plan for most owner-occupiers.
  • Can I keep payments the same even if the rate drops? Yes, and it’s a great hack. Keep paying the old amount and you’ll shorten your loan and slash interest without feeling the pain of a higher payment.
Next steps: what to do based on your situation

Next steps: what to do based on your situation

Pick the path that matches where you’re at.

  • Rolling off a low fixed rate soon: Ask your bank for an early refix quote and a retention offer. Get two outside quotes. If the gap is small after fees and clawbacks, staying could be best. If there’s a big saving, switch-and keep your remaining term the same to see a real payment drop.
  • Cash strapped and need payment relief now: Consider extending your term or a short interest-only period with your current bank. It’s not free-total interest rises-but it buys breathing room. Revisit in 6-12 months.
  • Looking to pay it off faster: If you can handle it, shorten the term at your next fix. Your monthly goes up, but the interest saving is massive. A split structure lets you keep some flexibility.
  • Renovations or debt consolidation: Model the top-up two ways: minimum payment vs maintaining your old combined payment. If you can afford it, keep paying more and set a shorter split for the top-up so you don’t drag it out for decades.
  • Investor with expiring interest-only: Compare lenders that still allow interest-only on investment lending within policy. Be ready for a higher payment if you roll back to principal-and-interest.

Final thought: payments don’t go down just because you remortgage. They go down because the numbers line up-lower rate, same term, same balance, and fees under control. Line those up, and you’ll see the drop in your bank app next month.