Cashback mortgages
A cashback mortgage is where a mortgage lender gives you a lump sum upon completion of your mortgage application. Every lender is different, but a cashback mortgage could see you getting between £200 and £1,000. This money is often given to you before you’ve made your first mortgage repayment but each lender varies. Cashback mortgages are often used by mortgage lenders as a way to get customers to choose them over other lenders on the market.
Are cashback mortgages worth it?
Whilst a lump sum of money can come in handy, especially for first time buyers who may need extra cash for big purchases such as furniture, the overall mortgage deals often aren’t as good as they seem.
Cashback mortgages often come with interest rates slightly higher than the regular mortgage deals on the market. According to research done by Which? the more cashback a lender gives you, the more they charge you in interest. Additionally, many of them also come with extra restrictions on making early repayments.
Currently, more than a quarter of fixed-rate mortgages available to first-time buyers come with cashback. However it’s important to look at the overall mortgage deal when looking around. A £1000 lump sum at the beginning of your mortgage agreement may seem enticing but you could end up paying more than that over the course of your term.
What to look at when considering a cashback mortgage
It’s important to take into consideration things like early repayment fees and you should always compare the interest rate against other deals and calculate how much you could save by going with a different mortgage.
Some lenders charge an upfront application fee when applying for a cashback mortgage so you’d need to take that into consideration. For example, you may be offered £250 cashback but also charged an application fee of £500. In many cases, the cashback isn’t subtracted from the application fee and you may get the cashback at a later date.
Cashback mortgage pros and cons
As just a quick overview, here are the main pros and cons of cashback mortgages:
Pros
- You can get up to £1000
- A lump sum can come in handy for big purchases, especially for first time buyers
Cons
- Often come with higher interest rates
- There may be an application fee attached
- Early repayment fees could apply
Getting help and advice
As mortgage brokers we’ll ensure you get the very best deal on the market. If you’re interested in a cashback mortgage we can look at the lenders offering those deals and will ensure that it’s worth it for you. For mortgage help and advice speak to one of our advisors.
