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What is a cashback mortgage?
As the name suggests, a cashback mortgage pays out a cash lump sum on the successful application of a mortgage.
Cashback mortgages typically offer a slightly higher interest rate than other mortgages and payout between £200 to £1000 on completion.
Deciding on a cashback mortgage is generally about weighing up the short term vs long term benefits. While a cashback mortgage may seem like a better offer initially, comparing the rates against other comparable mortgages is a crucial step to getting the best deal.
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How does a cashback mortgage work?
During the application process, your lender will detail the amount of cashback you'll be entitled to once the process has been completed and, typically, before repayments start.
Certain current accounts offer monthly cashback benefits to customers with both a mortgage account and current account. This is designed to incentivise people to retain both accounts with the bank.
Who can get a cashback mortgage?
Cashback mortgages are generally accessible for anyone and are popular with first-time buyers specifically. If you are considering a cashback mortgage, it is essential to weigh up the short-term cash benefits against the benefits in terms of rates.
What are the advantages of cashback mortgages?
The clear benefit of a cashback mortgage is the extra upfront cash payment on completion.
For first time buyers, in particular, this additional initial funding can be beneficial when it comes to the cost of buying your first home. You may also find lenders who offer discounts or benefits against other expenses associated with a home purchase such as free legal fees or surveys.
As with any mortgage, the interest rate should be the primary consideration, and initial upfront offers should be secondary.
Are there any drawbacks with a cashback mortgage?
Cashback mortgages are not for everyone.
As they typically have slightly higher interest rates than other mortgages, although the upfront payment is tempting, you may end up paying more back over time. It is essential to weigh up the cashback benefit in comparison to other mortgages available before making a decision.
Another disadvantage of cashback mortgages is that generally, they are subject to tighter restrictions when it comes to early repayment and overpayments. In certain situations of early repayment, you may find that the lender will look to retrieve the cashback benefit they issued when the mortgage was started. When it comes to early repayment charges, anything between 3-5% is standard, and you may not be able to make overpayments in the same way as you can with other mortgages.
Apply for a cashback mortgage now
Our team of experts have helped many people like you to get the best deal possible on their cashback mortgage. As a whole-of-market broker, we have more than 20,000 mortgages available from over 100 lenders. If you're looking to get started, our stress-free online process makes applying for your mortgage more straightforward than ever. Start comparing deals and apply now.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
