Comparing Mortgage Fees Across NZ Lenders
When embarking on the journey of homeownership in New Zealand, understanding the various fees associated with mortgages is crucial. While interest rates often take centre stage, the fees charged by lenders can significantly impact the overall cost of your home loan. This article aims to compare mortgage fees across major New Zealand lenders and provide insights on how to minimise these costs.
Types of Mortgage Fees
Before delving into specific lender comparisons, it’s essential to understand the common types of fees you might encounter:
- Application Fees: Charged for processing your loan application.
- Establishment Fees: One-time fees for setting up your loan.
- Ongoing Fees: Regular charges for maintaining your loan account.
- Valuation Fees: Costs associated with property valuation.
- Low Equity Fees: Applied when borrowing more than 80% of the property value.
- Break Fees: Charged when breaking a fixed-term mortgage early.
Comparing Major NZ Lenders
Let’s examine the fee structures of some of New Zealand’s major lenders:
ANZ
ANZ, one of New Zealand’s largest banks, has made efforts to simplify its fee structure:
- Loan Application Fee: $0
- Loan Top-up Fee: $0
- Low Equity Premium (LEP):
- 80.01 – 85.00% loan to value ratio: 0.25% of loan amount
- 85.01 – 90.00% loan to value ratio: 0.75% of loan amount
- Over 90.01% loan to value ratio: 2.00% of loan amount
- Discharge or Execution Fee: $100
ANZ also charges an Early Repayment Recovery for fixed-rate loans if you repay or restructure your loan during the fixed-rate period. The amount varies based on the bank’s economic loss at the time.
Kiwibank
Kiwibank, a New Zealand-owned bank, offers a competitive fee structure:
- Demand Fee: $10
- Discharge of Security Fee: $175 (full discharge), $100 (partial discharge)
- Fixed Rate Break Costs: Varies based on current interest rates and remaining fixed term
- Loan Restructure Fee: $25-$50 per change
- Top-up Fee: $240
- Kāinga Ora – Lenders’ Mortgage Insurance Fee: 0.50% of the loan amount for First Home Loans or Kāinga Whenua Loans
ASB
ASB Bank offers the ‘Back My Build’ home loan product for new constructions, which may have different fee structures. However, their standard fees include:
- Application Fee: Generally waived for most customers
- Low Equity Margin: Applied to loans with less than 20% equity
- Break Fees: Charged for early repayment of fixed-rate loans
Westpac
Westpac’s fee structure includes:
- Establishment Fee: Often waived as part of promotional offers
- Low Equity Margin: Applied to loans with less than 20% equity
- Break Fees: Charged for early repayment of fixed-rate loans
Strategies to Minimise Mortgage Fees
- Shop Around: Don’t settle for the first offer. Compare fees across multiple lenders to find the best deal.
- Negotiate: Many fees are negotiable, especially if you have a good credit history or are borrowing a large amount.
- Consider a Mortgage Broker: Brokers can often access special rates and fee waivers not available to the general public.
- Avoid Low Equity Premiums: Try to save a 20% deposit to avoid these additional charges.
- Understand Break Fees: If you’re considering a fixed-rate mortgage, understand the potential costs of breaking the term early.
- Look Beyond Interest Rates: A slightly higher interest rate might be offset by lower fees, resulting in a better overall deal.
- Consider Split Mortgages: A hybrid mortgage combining fixed and floating rates can offer flexibility and potential fee savings.
Managing Your Mortgage to Reduce Costs
Once you’ve secured your mortgage, consider these strategies to manage it effectively and reduce overall costs:
- Make Extra Repayments: If your loan allows, making additional payments can significantly reduce the interest paid over the life of the loan.
- Use an Offset Account: Some lenders offer offset accounts that can reduce the interest charged on your mortgage.
- Review Your Mortgage Regularly: Refinancing or restructuring your loan could lead to savings, but be mindful of any associated fees.
- Consider Shorter Loan Terms: While this may increase your regular payments, it can significantly reduce the total interest paid over the life of the loan.
When comparing mortgage fees across New Zealand lenders, it’s clear that while some fees are standard across the industry, there’s significant variation in both the types and amounts of fees charged. ANZ and Kiwibank, for example, have made efforts to simplify their fee structures, while others may have more complex arrangements.
The key to minimising mortgage fees lies in thorough research, negotiation, and a clear understanding of your financial situation and goals. Remember, the lowest interest rate doesn’t always equate to the cheapest mortgage when fees are taken into account.
As Christopher Walsh, founder of MoneyHub, advises: “Everyone needs to get the ‘right’ mortgage. Getting a mortgage ‘wrong’ is difficult; lenders must offer what is affordable. That being said, this guide is designed to help you save as much as possible”.
By taking the time to compare offers, negotiate terms, and understand the full cost of your mortgage including all fees, you can potentially save thousands of dollars over the life of your loan. Always read the fine print, ask questions, and don’t hesitate to seek professional advice if needed. Your home is likely to be the biggest investment of your life – make sure you’re getting the best possible deal on your mortgage.