In a competitive market, home loan lenders are doing everything they can to attract new customers and retain existing ones.
Cashback deals are one of the ways lenders attempt to gain new customers, especially borrowers who are looking to refinance their home loan.
In this article, we explain what refinance cashback deals are and why lenders offer them for refinancing borrowers. We also discuss if it’s worth taking advantage of a cashback offer when you refinance your mortgage and what you’ll need to qualify for one of these offers.
A cashback deal involves a lender offering borrowers some kind of financial incentive to take out a home loan with them.
This could be in the form of cash, deposited into your bank account as a lump sum once the home loan has settled, or deducted from fees you would otherwise pay. It could also involve receiving a gift card for a store or brand.
Typically, refinance cashback offers range from $1,000-$4,000, depending on the lender. They’re usually only available for a limited time too.
Put simply, lenders want to attract new customers to their business and refinance cashback offers are one way they can do this.
While these offers can be targeted at new purchase borrowers, lenders often target refinancing borrowers to make themselves more competitive in a saturated market.
From a lender’s perspective, a cashback deal might be what sways a refinancing borrower who is weighing up similar home loans with different lenders.
Cashback offers are usually for a limited time only, which can increase urgency in potential customers who may be looking to switch home loans.
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Whether or not you should go for a cashback deal when you refinance is entirely up to your specific financial situation and needs.
However, it might be helpful to consider the following before making a decision:
If you decide to refinance and take advantage of a cashback deal, here are some other considerations to keep in mind when you switch loans.
Are you on a fixed rate mortgage? Chances are you’ll have to pay break costs if you refinance before the end of your fixed term.
These costs can vary, but they may still be worth paying if the benefits of refinancing outweigh the fees you’ll be required to pay.
It’s also likely you’ll pay a discharge fee, whether you’re on a fixed or variable rate home loan. This fee is typically around $300.
When refinancing, it can be easy to focus on the interest rate or cashback offer that comes with the loan you want to switch to. But, it’s important to consider the home loan as a whole too.
You might want to check that the loan has no cap on extra repayments if this is important to you, for example, or that you won’t be charged hefty fees. This way, you can ensure your mortgage meets all your needs.
While the product itself is important when you refinance your home loan, so too is the lender you’re switching to. What’s their customer service record like? Will you have physical access to a branch or is the lender online only?
These are some questions you might ask to help work out whether the lender will suit your requirements.
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Different lenders will have different requirements for borrowers to qualify for cashback deals, but typically, you’ll need to:
It could be a good idea to chat with a Home Loan Specialist or mortgage broker to make sure you’re eligible to refinance your home loan.
At the end of the day, doing plenty of your own research to compare home loan products before settling on a loan can help you decide whether a cashback offer is worth it.
Do you have questions about refinancing? Our Home Loan Specialists are here to help. Book an appointment at a time that works for you.
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
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