Cashback Mortgages
Whether you're an aspiring homeowner taking your first steps onto the property ladder or a current homeowner looking to lighten the financial load of homeownership, every extra penny can make a big difference. Buying and maintaining a home is expensive, and that's where cashback mortgages can provide valuable support.
In this guide, we’ll go over everything you need to know about cashback mortgages and help you decide if this option is the right fit for your financial needs. We'll cover:
What is a cashback mortgage?
A cashback mortgage is a type of loan that provides you with a lump sum of cash when you successfully purchase a new home or remortgage your existing one.
While often designed for first-time buyers, a cashback mortgage can also be a great choice for anyone needing extra funds for expenses like moving home costs, renovations, or new furniture.
How do cashback mortgages work?
A cashback mortgage provides a lump sum of money when you take out the loan. This amount can either be a fixed sum or a percentage of the total amount borrowed from the lender.
In some cases, the cashback might be equivalent to one of your monthly payments, typically ranging from £150 to £1,000. Your lender will specify the exact amount upfront.
When do you get the mortgage cashback?
The cashback is usually disbursed either upon the completion of the mortgage or when you start making loan repayments.
This lump sum is generally deposited directly into your bank account, providing you with flexibility for your preferred expenses. However, some lenders may designate the cashback to cover specific costs, such as solicitor fees.
Can I get a cashback mortgage?
Eligibility for a cashback mortgage depends on your individual financial situation, including factors such as your income and credit score. You may also need to meet additional criteria set by the lender.
For instance, many lenders require you to have an active banking relationship with them, such as holding a current account. Additionally, some cashback mortgage offers are exclusively available to first-time buyers, so current homeowners may not qualify.
If you want an idea of where you stand financially before you apply, then you can use our free credit check tool (£14.99 per month after the free 30-day trial). Using it will help you to spot possible mistakes and instances of fraudulent activity on your record so that you can address any problems as soon as possible. The trial and subscription can be cancelled at any time.
What are the interest rates on cashback mortgages?
One key drawback of cashback mortgages is that they often come with higher interest rates compared to standard fixed-rate or variable-rate mortgages without incentives.
Because of this, cashback mortgages can prioritise short-term benefits over long-term savings. Therefore, it's vital to compare various cashback mortgage options before making a decision. Failing to do so could lead to significantly higher monthly payments and an increased overall cost of the mortgage.
What fees will I pay for a cashback mortgage?
Fees associated with cashback mortgages can vary depending on the lender. Nevertheless, it’s important to be aware that additional charges may include arrangement fees, valuation costs, and legal fees. These fees can often be higher with cashback mortgages compared to traditional mortgages.
Pros and cons of cashback mortgages
Advantages:
Immediate cash: Receive a lump sum that provides flexibility for personal spending.
Expense coverage: The funds can help cover expenses related to purchasing a new home, such as moving costs and furnishings.
Additional perks: Some cashback mortgages come with extra benefits, like refunds on stamp duty or coverage for removal and valuation fees, improving their overall value.
Disadvantages:
Higher interest rates: Typically, cashback mortgages come with higher interest rates, leading to increased monthly payments and a higher overall cost.
Less competitive fees: Fees associated with cashback mortgages may be less competitive compared to other mortgage options.
Limited overpayment options: Some cashback mortgages impose stricter limits on overpayments, which could result in penalties such as early repayment charges (ERCs).
Can I get cashback when I remortgage?
Yes, some lenders offer cashback as part of their remortgage deals. Although, cashback remortgages often come with higher interest rates. If you’re nearing the end of your mortgage term and considering a remortgage to avoid your lender’s standard variable rate (SVR), it's important to compare all available options carefully to make an informed choice.
Should I get a cashback mortgage?
Deciding whether to choose a cashback mortgage depends on whether you value the immediate lump sum more than the long-term costs associated with higher interest rates. For some, the ability to cover legal fees or furnish a new home can make a significant difference in achieving their homeownership goals.
Regardless of your choice, it’s advisable to consult a mortgage broker. A broker can thoroughly evaluate all available options and help you find the most competitive deal tailored to your specific financial situation.
At The Mortgage Genie, we have an in-depth understanding of how to get a mortgage and are dedicated to helping clients secure all types of loans. We hope this guide has provided clarity on cashback mortgages and answered any questions you may have.
Each day, we help more people achieve their homeownership dreams by finding the perfect mortgage product and guiding them through every step of the journey. If you’re looking for expert mortgage brokers, don’t hesitate to call us at 01915809890. We’ll work with you to find a mortgage or remortgage solution tailored to your needs. And why not see how much you could borrow up to today by using our mortgage calculator?
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.
