Whether you're an aspiring homeowner looking to step onto the property ladder or a current homeowner seeking ways to ease the financial burden of maintaining your residence, every additional monetary benefit can make a significant difference. Acquiring and sustaining a home can be costly, and that's where cashback mortgages come into play.
In this guide, we'll explore all the essential aspects of cashback mortgages and help you determine whether getting one could be the right decision for you. We’ll go over:
What is a cashback mortgage?
A cashback mortgage is a particular mortgage type which entitles you to receive a lump sum of cash upon the successful purchase of a house, or instead when you decide to remortgage your existing home.
How do cashback mortgages work?
As previously mentioned, the cashback you receive will be in the form of a lump sum. The specific amount might either be a predetermined figure, or rather a percentage of the borrowed amount from the lender. In certain instances, the cashback could correspond to one of your monthly payments, usually ranging from £150 to £1000, with your lender telling you the exact amount upfront.
When do you get the mortgage cashback?
The disbursement of the cashback will occur either upon the completion of the mortgage, or when you begin making loan repayments. This lump sum is often directly credited to your bank account, offering flexibility for expenditure on any preferred purposes. Although, it's worth noting that some lenders may specifically allocate the cashback to cover solicitor fees.
Can I get a cashback mortgage?
As with any mortgage, your qualification for a cashback mortgage is based on your individual circumstances and financial standing, assessed through factors like your income and credit score. Additionally, there may be other prerequisite conditions which must be met for eligibility.
For instance, it's commonly a requirement to have an active banking relationship with the lender, implying that you hold a current account with them. Furthermore, certain cashback mortgage providers exclusively serve first-time buyers, limiting eligibility to those who are not currently homeowners.
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?
The primary drawback of cashback mortgages stems from their generally higher interest rates in comparison to standard fixed-rate and variable-rate mortgage deals, those which do not include incentives.
Due to this characteristic, cashback mortgages tend to prioritise short-term gains. And so, it is very important to compare all available cashback products on the market before making a decision. Naturally, failure to do so might result in substantially higher monthly repayments, leading to an increased long-term mortgage cost.
What fees will I pay for a cashback mortgage?
The specifics of fees depend on your chosen lender; nevertheless, it is recommended to consider extra charges, including those associated with arrangement, valuation, and legal processes. This is because these fees can be higher for cashback mortgages, when compared to those for conventional mortgages.
Advantages of cashback mortgages
You receive a lump sum that provides flexibility for personal spending.
The funds can help alleviate the expenses involved with purchasing a new home, covering moving costs and facilitating furnishings.
Some cashback mortgages offer more perks, such as refunds on stamp duty or coverage for removal and valuation fees, improving the overall value.
Disadvantages of cashback mortgages
Higher interest rates may lead to increased monthly payments, making the mortgage more expensive over the course of the term.
Mortgage fees associated with cashback mortgages might be less competitive when compared to other options.
Some cashback mortgages may have stricter limitations on overpayments, potentially resulting in penalties like early repayment charges (ERCs).
Can I get cashback when I remortgage?
Yes, select lenders do offer cashback as part of remortgage deals, though these likewise usually come with higher interest rates. If you're approaching the end of your mortgage term and considering a remortgage to avoid your lender’s standard variable rate (SVR), we reiterate that you should compare all available products in order to make an informed decision.
Should I get a cashback mortgage?
The decision to opt for a cashback mortgage hinges on your prioritisation of the immediate lump sum incentive versus the potential long-term cost implications arising from higher interest rates. For some individuals, the prospect of offsetting legal fees and furnishing expenses is the decisive factor in achieving their dream home comfortably.
Regardless of your preference, we highly recommend engaging a mortgage broker who can thoroughly explore all your available pathways and products. This ensures that you secure the most competitive deal, one which is tailored to your specific situation and financial circumstances.
We at The Mortgage Genie have an in-depth understanding on how to get a mortgage and are committed to helping people get loans of all types. We sincerely hope that this guide has answered all of your questions surrounding cashback mortgages.
Each day we assist a growing number of people in finding housing happiness by helping them to get their perfect mortgage product and guiding them through every step of the way. If you’re in need of a team of expert mortgage brokers then don’t hesitate to call us at 01915809890 and we’ll get started on a mortgage or remortgage solution geared towards you. 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.