Remortgaging sounds simple: switch your mortgage to a better deal, save money, maybe unlock some equity. But under that clean promise lies a web of hidden risks that can cost you thousands - or even your home. In New Zealand, where house prices have swung wildly and interest rates are still above 7%, remortgaging isn’t just a smart move - it’s a high-stakes decision. Many people think they’re getting a better deal, only to find themselves locked into a longer term, hit with unexpected fees, or stuck with a lender who doesn’t care about their financial health anymore.

You’re not just switching lenders - you’re restarting the clock

One of the biggest risks people ignore is the reset of your mortgage term. Say you’ve been paying on a 25-year mortgage for five years. You’ve got 20 years left. You remortgage to a new 30-year deal to get a lower monthly payment. Suddenly, you’re back to paying for 30 years total. That means you’ll pay more in interest over time - even if the monthly payment is lower. A 2025 study by the Reserve Bank of New Zealand showed that 68% of remortgagers who extended their term ended up paying over $40,000 more in interest than they saved in monthly cash flow.

It’s not just about the number. It’s about momentum. Every time you remortgage, you reset your equity build-up. You’re paying mostly interest again in the early years. That slows down your path to owning your home outright. If you’re aiming to be mortgage-free by retirement, this reset can throw off your entire plan.

Early repayment charges can wipe out your savings

Most fixed-rate mortgages come with early repayment charges (ERCs) if you leave before the term ends. These aren’t small fees - they’re often 2% to 5% of your remaining balance. On a $600,000 mortgage, that’s $12,000 to $30,000. People often forget about these until they get the bill from their current lender. They think they’re saving $300 a month on a new rate, but then they’re hit with a $20,000 penalty. Suddenly, they’re $19,700 worse off.

Even if your fixed term has ended, some lenders still charge exit fees. Others charge for valuation, legal work, or application processing. These can add up to $2,000-$5,000. Before you sign anything, ask for a full breakdown of all costs - not just the interest rate. A 0.5% lower rate doesn’t matter if you’re paying $4,000 in fees upfront.

Unlocking equity sounds great - until it doesn’t

One popular reason people remortgage is to release equity. They want cash for renovations, a car, or to pay off credit cards. But tapping into your home’s value means you’re borrowing more than you originally did. You’re increasing your debt against your home. If property values drop - and they have, especially in Auckland since 2022 - you could end up with negative equity. That means you owe more than your house is worth.

There’s also the temptation trap. When you see $50,000 suddenly available, it’s easy to spend it on things that don’t last. A new kitchen might add value. A holiday or a new TV won’t. The Reserve Bank found that 42% of homeowners who released equity in 2023 used it for non-property-related spending. Two years later, 31% of them regretted it.

Interest rate risk doesn’t disappear - it changes shape

People remortgage because they’re scared of rising rates. But switching to a new fixed rate doesn’t eliminate risk - it just moves it. If you lock in a 6.8% fixed rate for three years now, you’re protected until 2029. But what if rates drop to 5% in 2027? You’re stuck. You can’t refinance again without paying another set of fees. And if you go variable, you’re exposed to the same swings you were trying to avoid.

There’s also the risk of being priced out. Lenders now use stricter serviceability tests. If your income hasn’t gone up since your last mortgage, or if your expenses have, you might not qualify for the rate you want - even if you’ve paid on time for years. In 2025, 18% of remortgage applicants in Auckland were declined because their debt-to-income ratio was too high, even though they had good credit scores.

Your credit score might take a hit - and you won’t see it coming

Every time you apply for a new mortgage, the lender runs a hard credit check. One check might not matter. But if you’re shopping around and apply to three or four lenders in a month, it starts to look like you’re desperate. That can lower your score by 10-20 points. Not enough to get denied outright, but enough to push you into a higher interest bracket. Some lenders offer better rates only to customers with scores above 750. A small dip could cost you 0.3% more on your rate - which adds up to $1,500 a year on a $500,000 loan.

Also, if you’ve missed a payment in the past year - even one - your chances of getting a good deal drop sharply. Lenders now use real-time data. A missed utility bill or a late credit card payment can show up on your credit file and affect your mortgage application.

Lenders don’t care about you - they care about their numbers

When you first got your mortgage, the lender probably treated you like a valued customer. After you remortgage, you’re just another account in their system. New lenders often have lower customer service standards. They use automated systems. You can’t talk to a real person about your situation. If you lose your job or face a medical emergency, you might find your new lender has no flexibility. They’ll follow the rules - even if it means you lose your home.

Also, many lenders now offer ‘low-doc’ or ‘self-certified’ remortgage deals. These sound easy - no payslips, no bank statements. But they come with much higher interest rates and stricter penalties. They’re designed for people who can’t prove income - not for people who just want a better deal.

What to do instead

Before you remortgage, ask yourself these questions:

1. Will I save more than $5,000 in fees and interest over the next three years?
2. Am I extending my term just to lower my monthly payment - and what’s the long-term cost?
3. Do I have a clear plan for any equity I release - and will it increase my home’s value?
4. Have I checked my credit score and fixed any errors?
5. Am I switching because I’m unhappy with my lender - or because I’m scared of rising rates?

If you’re unsure, talk to a fee-based mortgage advisor - not someone paid by the lender. They’ll run the numbers for you, including all fees, penalties, and long-term interest. Don’t trust a broker who says, ‘This deal is perfect for you.’ Ask for a written comparison: old loan vs. new loan, total cost over five years, monthly payments, break-even point.

Remortgaging isn’t bad. But it’s not a free lunch. It’s a financial decision with consequences. Do the math. Don’t let a low monthly payment blind you to the bigger picture.

When remortgaging makes sense

There are times when it’s the right move:

• You’re on a high variable rate (over 8%) and can lock into a fixed rate under 6.5% with no ERCs.
• You’ve paid off 20%+ of your original loan and your home value has gone up - you can get a better rate with lower LVR.
• You need to consolidate high-interest debt (like credit cards) into your mortgage, and you have a plan to stay debt-free.
• Your income has increased significantly since your last mortgage, and you now qualify for a better deal.

But if you’re doing it because you’re stressed, confused, or pressured - stop. Walk away. Wait. Get advice. Your home is your biggest asset. Don’t gamble with it for a few hundred dollars a month.

Next steps if you’re thinking about remortgaging

Here’s what to do next:

1. Check your current mortgage statement for early repayment charges.
2. Get a free credit score check from Equifax or Illion.
3. Use a mortgage calculator to compare your current loan with 3-5 new offers - include all fees.
4. Book a 30-minute meeting with a fee-based mortgage advisor - not one tied to a bank.
5. Wait 72 hours before signing anything. If you’re feeling pressured, walk away.

Remortgaging isn’t a race. It’s a decision that should be made with your eyes open - not your wallet.