BNZ is offering 4.99% interest for 1 year. Is this an offer you should take?
At the moment BNZ is offering a 1 year fixed interest for 4.99%. Is this a good offer or is there a catch?
In this blog I will explain what you should be aware of.
First of all, the rules for this low interest offer are quite strickt.
Only new to bank customers (This means refinance from a different bank, or first time home buyers)
No cashback offered
When comparing these mortgage options, it's important to consider all theese incentives that lenders offer. The BNZ offer is a 1.5% lower interest rate in stead of an approximately 1% cashback upfront (which most of the other banks offer). However, the impact of these incentives may vary depending on the duration of the lower interest rate. In this case it is only 1 year
Assuming the lower interest rate is only for one year, it may be more appealing to opt for the cashback upfront. This is because the lower interest rate will only apply for a short period of time and will not have a significant impact on the overall cost of the mortgage.
For example, let's say you have a $300,000 mortgage with a 30-year term and an interest rate of 4%. If you could get a 1.5% lower interest rate for the first year, your interest rate would be 2.5% for that year only, and your monthly payment would drop to $1,186.50. However, after the first year, your interest rate would return to 4%, and your monthly payment would increase to $1,432.25. If you choose the cashback offer your monthly payments are $1,432.25 from the first month. Taking this lower interest rate increases your cashflow and lowers your monthly payments for the first year. This is a difference of $2,949.75.
On the other hand, if the lender offers a 1% cashback upfront, you would receive $3,000 at closing, which can be used to cover settlement costs, make a deposit payment, or pay off other debts. This can be particularly helpful for homebuyers who are struggling to come up with the upfront costs associated with purchasing a home.
In summary, if the lower interest rate is only for one year, the cashback upfront option may be more appealing as it provides immediate financial relief. However, it's important to weigh the benefits and drawbacks of each option and choose the one that best fits your individual financial situation.
