# HL-Q026: Borrower journey Another lender has offered me a lower mortgage rate and a cash payment to move my home loan. How do I work out whether it's actually a better deal once everything is included? Borrower: Homeowner considering a switch [Study](https://nzbrands.ai/research/banking/home-lending/) · Collected 11 October 2026 ## chatgpt Answer ID: d3ac6b84-d776-421a-81d4-ad0f8227f018 The key is to compare the total financial benefit of switching your mortgage, not just the lower interest rate or the cash incentive. In New Zealand, a lender offering a lower rate and a cash contribution can be a great deal, but legal fees, early repayment charges, cashback clawbacks and the loan structure can change the result significantly. The best way to work it out is to calculate how much better off you'll be over the period you realistically expect to keep the loan, after allowing for every switching cost. ## 1. Add up all the costs and benefits Use this checklist for your current lender versus the new lender. | Item | What to include | | --- | --- | | Interest savings | Interest you'll save at the new rate over your comparison period | | Cash contribution | The actual amount the new lender will pay you | | Legal fees | Solicitor's fees for refinancing and registering the new mortgage | | Break fee | Any early repayment or fixed-rate break cost from your current lender | | Discharge and admin fees | Fees for closing the existing loan and setting up the new one | | Cashback clawback | Any contribution you must repay your current lender if you leave before its required period | | Loan changes | Differences in fees, offset accounts, revolving credit, or other features | | Future rate risk | Whether the new rate expires sooner or leaves you exposed to a higher rate later | Important: Don't assume the entire cash contribution is a profit. It may be offset by fees, and it may come with conditions requiring you to stay with the new lender for a specified period. ## 2. Calculate the break-even point A useful first calculation is: Net benefit=interest saved+cash contribution−all switching costs\begin{aligned} \text{Net benefit} ={}& \text{interest saved}\\ &+ \text{cash contribution}\\ &- \text{all switching costs} \end{aligned}Net benefit=​interest saved+cash contribution−all switching costs​ If the result is positive, switching may save you money. If it is negative, staying may be cheaper. For a proper comparison, also account for changes in loan balances, repayments and future interest rates. Here's a simple hypothetical example. Illustrative figures only — not current market offers Mortgage balance # $600,000 Rate reduction # 0.40% Interest saving estimate First year, roughly ### +$2,400 New lender's cash contribution ### +$4,000 Legal and other switching costs ### −$1,500 Illustrative first-year benefit Before any other costs or conditions # $4,900 The $2,400 interest saving is an approximation based on the starting balance. Your actual savings will change as you make repayments and the balance declines. The calculation also assumes the rate difference applies for the full year. The key question is whether the deal remains worthwhile over the period you plan to stay with that lender. ## 3. Compare the loans over the same period Don't compare one loan over 30 years with another over 25 years, or assume a lower repayment necessarily means a cheaper loan. A longer term can reduce the monthly repayment while increasing the total interest paid. Compare both loans using: - The same opening balance and remaining loan term. - The actual interest rates and dates each fixed rate expires. - The same repayment frequency and repayment amount, where practical. - All switching fees and cash contributions. - The remaining loan balance at the end of your comparison period. For a fixed-rate mortgage, compare the period until your next likely refix or refinance, and also consider a longer horizon if you expect to stay with the lender. A lower rate today doesn't guarantee the lowest rate when the fixed term ends. New Zealand's Consumer Protection guidance explains that breaking a fixed-term mortgage can incur a fee, and you should ask your existing lender for the amount before proceeding. [Mortgages and home loans](https://www.consumerprotection.govt.nz/help-product-service/borrowing-money/mortgages-and-home-loans) ## 4. Watch out for these four common traps - Cashback clawbacks: Your existing bank may require you to repay some or all of a previous cash contribution if you leave early. The new lender may also have its own minimum-stay requirement. Check both contracts. [Mortgages and home loans](https://www.consumerprotection.govt.nz/help-product-service/borrowing-money/mortgages-and-home-loans)[Mortgage advice](https://www.fma.govt.nz/consumer/getting-advice/mortgage-advice/) - Break fees on fixed loans: Ask your current lender for a written payout and break-fee estimate. Don't rely on a generic estimate, as the fee depends on your circumstances and market rates. - A lower rate on only part of the mortgage: Compare each fixed-rate portion separately, including when each portion expires. Also check whether the new rate requires you to move everyday banking or meet other conditions. - A longer repayment term: Make sure you aren't reducing repayments simply by stretching out the debt, which can increase total interest costs. [How to find a good deal on your mortgage » Sorted](https://sorted.org.nz/guides/home-buying/shopping-for-a-mortgage/)[Understand the true cost​​](https://www.consumerprotection.govt.nz/general-help/guide-to-buying-smart/understand-the-true-cost) ## 5. Work out your own numbers You can use this calculator to make an initial estimate. Enter the details from your two offers; use the same comparison period for both. The interest estimate is simplified, so a lender's amortisation schedule or a mortgage calculator will give you a more accurate result. ## 6. Before you accept, get these answers in writing Ask the new lender or mortgage adviser: 1. What is the total cash contribution, and exactly when must I repay it if I refinance again? 2. What are all legal, application, valuation and account fees? 3. What will my repayments be, and what will my outstanding balance be after two years? 4. Are the rates conditional on moving other accounts or taking a particular loan structure? 5. What happens when the fixed rate expires, and what fees would apply if I sell or refinance early? The New Zealand Financial Markets Authority also recommends getting written advice on loan terms, fees, features and potential charges if you leave early. [Mortgage advice](https://www.fma.govt.nz/consumer/getting-advice/mortgage-advice/) ## Want to compare your actual offers? If you share a few details, I can help calculate a more realistic comparison for your situation. You don't need to have every figure yet. In particular, the current fixed-rate expiry date and the break fee can make a substantial difference to whether switching now is worthwhile. --- ## gemini Answer ID: e12fb29f-2d6b-4a42-a72a-3ace22f9e8c9 Switching your home loan (mortgage) to secure a lower interest rate and a cash contribution (cashback) can save you thousands of dollars, but hidden costs often lurk beneath the surface. To determine if the new offer is genuinely better, you need to look past the upfront bonus and calculate the **total net financial benefit** over a fixed period (such as your current fixed-rate term). Here is a step-by-step framework to evaluate the deal: --- ### Step 1: Account for Break Costs with Your Current Lender If you are currently on a fixed-rate mortgage and want to break it early to move to a new lender, your existing bank will likely charge a **break fee** (or early repayment adjustment). * **How it works:** Banks calculate this based on the difference between your current wholesale funding rate and the wholesale rate for your remaining term. * **Action:** Ask your current bank for a formal break cost figure. This amount must be factored into your upfront costs. ### Step 2: Calculate Upfront Costs of Switching Moving lenders is rarely free. Tally up all the expenses required to make the switch: * **Legal Fees / Solicitor Costs:** Property transfers and discharge of mortgages require legal work (typically ranges between a few hundred to over a thousand dollars). * **Valuation Fees:** Some new lenders require a registered property valuation to approve the loan. * **Discharge Fees:** Your current bank may charge a fee to release the title. ### Step 3: Factor in the New Lender's Cash Contribution The new lender’s cash incentive works in your favor, but note that banks usually attach **clawback clauses**. * If you leave the new bank within a certain timeframe (typically 3 to 4 years), you will have to repay a pro-rata portion of that cash back. ### Step 4: Run the Math (Total Cost Comparison) Compare the total cost of staying versus moving over your likely timeframe (e.g., the length of the new fixed term, such as 1 or 2 years). $$\text{Net Benefit} = \text{Cash Contribution} - (\text{Break Fees} + \text{Legal/Valuation Costs}) - \text{Total Interest Difference}$$ #### Example Framework: 1. **Upfront Outflows:** Break fee ($1,500) + Legal fees ($800) = **$2,300** 2. **Upfront Inflows:** New lender cashback = **$3,000** 3. **Net Upfront Position:** $3,000 - $2,300 = **+$700 head start** 4. **Interest Savings:** Calculate how much less interest you will pay over your fixed term at the lower rate compared to your current rate. (For example, a 0.25% drop on a $500,000 balance saves roughly $1,250 in the first year). 5. **Total Value:** Net Upfront Position ($700) + Year 1 Interest Savings ($1,250) = **$1,950 net gain** in the first year. --- ### Your Numbered Action Plan 1. **Request a formal break-cost quote** from your current lender today to find out the exact cost of exiting your current term. 2. **Obtain a written breakdown of fees** from the new lender, including solicitor costs, discharge fees, and any valuation requirements. 3. **Confirm the cashback clawback conditions** with the new lender so you know the exact penalty if you need to refinance or sell within 3 to 4 years. 4. **Compare the total net position** (Cashback minus [Break Costs + Legal Fees] plus total interest saved over the proposed fixed term) to see if it delivers a positive return. *** To help run these numbers specifically for your situation, what is your current remaining mortgage balance and how many months left do you have on your current fixed-rate term? --- ## ai-mode Answer ID: ec91f66a-305a-4b38-b0bf-75afd639a4ab To work out whether a new lender’s offer is genuinely better once everything is factored in, you need to look past the headline interest rate and upfront cash incentive. You have to calculate the **net financial impact** over the period you expect the rate or loan structure to last. Here is a step-by-step framework to tally up all the costs and savings: 1. **Calculate your ongoing interest savings** Compare your current monthly repayments (at your existing rate) with the new proposed repayments (at the lower rate) over the timeframe you plan to fix the rate. For example, if you are fixing for two years, multiply your monthly dollar savings by 24 months to see your gross interest savings. 2. **Add the new cash payment (Cashback)** Add the cash contribution offered by the new bank to your total savings. However, be mindful of any **clawback conditions**. New Zealand banks usually require you to pay back all or part of this cash incentive if you leave them within a specific window—typically 3 to 4 years. If you think you might sell or switch again soon, that cash isn't fully yours yet. 3. **Subtract exit costs from your current bank (Break Fees)** If you are currently on a fixed-rate term that hasn't expired, your current bank will likely charge a **fixed-rate break fee** (prepayment cost). This is calculated based on wholesale swap rate movements since you fixed. Ask your current bank for an official, up-to-date break fee quote. _(Note: If wholesale interest rates have risen higher than when you locked in your rate, your break fee is usually negligible or just a nominal admin fee.)_ 4. **Subtract incoming switching and legal costs** Moving banks isn't free. You will likely incur third-party expenses, which may include: * **Legal fees** for discharging your old mortgage and registering the new one (though some incoming banks offer a legal fee contribution or rebate to help cover this). * **Property valuation fees** , if the new bank requires a registered valuation of your home. 5. **Weigh up the "Clawback Risk" of your current deal** Check if you received a cash contribution when you last signed or refixed with your current lender. If you haven't been with them long enough (usually within 3 or 4 years), switching away now will trigger a **clawback** where your current bank takes back a proportional amount of that past cash. You must subtract this clawback amount from your new totals. 6. **Calculate the final Net Position** Net Position=(Total Interest Savings+New Cashback Received)−(Break Fee+Switching/Legal Costs+Old Cashback Clawback)[1.1.2,1.2.1,1.2.2]Net Position equals open paren Total Interest Savings plus New Cashback Received close paren minus open paren Break Fee plus Switching/Legal Costs plus Old Cashback Clawback close paren open bracket 1.1 .2 comma 1.2 .1 comma 1.2 .2 close bracket Net Position=(Total Interest Savings+New Cashback Received)−(Break Fee+Switching/Legal Costs+Old Cashback Clawback)[1.1.2,1.2.1,1.2.2] If the resulting number is positive after accounting for all frictional costs, the switch makes financial sense. You can also run numbers through tools like the MoneyHub Mortgage Refinance Calculator or a Cashback Clawback Calculator to model the figures. To help me give you a more precise breakdown, could you tell me: * Roughly **how much is left on your mortgage** and **how long is left on your current fixed term**? * Whether you received a **cashback from your current bank** when you last refixed? I can help you estimate how the numbers line up. --- ## ai-overviews Answer ID: c013fe1c-2318-426b-8e52-4b97f46c2782 To figure out if switching banks is genuinely a better deal, you need to calculate the **Net Financial Benefit** by subtracting the cost of leaving your current bank and setting up the new loan from your total savings (lower interest payments + cash contribution). Many Kiwi homeowners focus entirely on the upfront cash payment, but **hidden clawback clauses, break fees, and legal costs** can quickly wipe out those gains. * * * Step-by-Step Switching Calculation To find the true value of the offer, use this formula: Net Benefit=(Interest Saved+Cash Contribution)−(Break Fees+Legal Fees+Current Bank Cash Clawback)Net Benefit equals open paren Interest Saved plus Cash Contribution close paren minus open paren Break Fees plus Legal Fees plus Current Bank Cash Clawback close parenNetBenefit=(InterestSaved+CashContribution)−(BreakFees+LegalFees+CurrentBankCashClawback) Follow these 4 sequential steps to gather your numbers: [1. Calculate Interest Savings] ➔ [2. Add New Cash Incentive] ➔ [3. Subtract Switching Costs] ➔ [4. Check Clawback Risk] 1\. Calculate Your Interest Savings Find out exactly how much less interest you will pay during the fixed-rate term with the new lender. * _Example:_ If you have a **$500,000** mortgage and the new lender drops your rate by **0.50%** , you will save roughly **$2,500** in interest in the first year alone. 2\. Factory in the New Cash Contribution Lenders in New Zealand typically offer **0.7% to 1%** of the total loan amount as a cash contribution to entice you to switch. * _Example:_ A 1% cash offer on a **$500,000** mortgage gives you **$5,000** upfront cash. 3\. Subtract the Costs to Move Switching loans isn't free. You must factor in these common New Zealand refinancing costs: * **Legal Fees:** You will need a lawyer to discharge the old mortgage and register the new one. This typically costs between **$1,000 and $1,500**. * **Early Repayment Adjustments (Break Fees):** If you are breaking a fixed-term contract with your current bank early, they may charge you a break fee. You must request this exact figure from your current lender. 4\. Audit Your Existing "Clawback" Window This is the most common blind spot. When you first took out or refixed your current mortgage, your bank likely gave you a cash contribution. * Most NZ banks embed a **3-year clawback clause** in their terms. * If you switch lenders before this period ends (usually 36 months), you must **repay that cash back to your original bank** on a pro-rata or full basis. * * * Direct Comparison: Scenario Analysis Assuming a **$500,000 loan** breaking a fixed term 18 months early to switch to a 0.50% lower rate: Financial Element| Scenario A: No Clawback Active| Scenario B: Within Clawback Window ---|---|--- **New Cash Contribution (+)**| $5,000| $5,000 **18-Month Interest Savings (+)**| $3,750| $3,750 **Legal Fees (-)**| -$1,200| -$1,200 **Bank Break Fees (-)**| -$400| -$400 **Current Bank Clawback (-)**| $0 _(Outside 3 years)_| -$3,000 _(Inside 3 years)_ **Net Financial Benefit**| **+$7,150 (Great Deal)**| **+$4,150 (Marginal Deal)** * * * Three Crucial Blind Spots to Check * **The Structure of the New Loan:** Ensure the new lender isn't stretching your loan term back out to 30 years. Extending the timeframe reduces your weekly repayments but **significantly increases the total interest** you pay over the life of the loan. * **New Clawback Timers:** The new lender will lock you into a brand-new 3-year clawback window for their cash contribution. If you plan to sell the house or move again soon, you could face penalties. * **Leverage an "Intent to Refuse":** Before executing the move, call your current bank's retention team. Tell them you have a written offer from a competitor. To keep your business, your current bank will frequently offer to match the lower interest rate or drop a discretionary credit into your account—saving you the hassle and legal fees of moving. * * * To help refine these numbers for your exact situation, let me know: * What is your **current remaining loan balance**? * How long is left on your **current fixed-rate term**? * Roughly **how many years ago** did you take out or last refix your loan with your current bank?