When considering the prospect of remortgaging, the array of options can be overwhelming. However, amidst the various choices, a consistent truth prevails and that is that every financial advantage can significantly impact your situation.
Home maintenance comes with a considerable price tag, encompassing not only the routine monthly repayments but also a multitude of associated costs. If you find yourself in need of additional funds immediately upon remortgaging, exploring the realm of cashback remortgages may provide a viable solution. We’ll go over:
What is a cashback remortgage?
A cashback remortgage is a type of mortgage refinancing in which you as the borrower switch to a new lender and also receive a cash sum as part of the deal. This cashback is typically a percentage of the loan amount and is provided by the new lender as an incentive.
How do cashback remortgages work?
Cashback remortgages work the same as any other remortgage product, with the lump sum being the distinguishing factor. The process of remortgaging involves paying off your existing mortgage with the proceeds of a new mortgage. People often consider remortgaging for various reasons, such as obtaining a better interest rate, reducing monthly payments, or releasing equity from their property.
The incentive offered in a cashback remortgage can be used by the borrower for various purposes, such as covering the costs associated with the remortgage (e.g. legal and valuation fees) or for other personal financial needs like home improvements.
Can I get a cashback remortgage?
As with any mortgage or remortgage product, your qualification is contingent upon your individual circumstances and financial standing, this being assessed through factors such as your income and credit score. Additionally, there may be other prerequisite conditions that must be met for eligibility.
For instance, it's commonly a requirement to have an active banking relationship with the lender you want to get a cashback remortgage with, this implying that you hold a current account with them.
If you want an idea of where you stand financially before you apply for a remortgage, 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.
Do cashback remortgages have higher interest rates?
The main drawback associated with cashback remortgages lies in their typically having higher interest rates, as compared to standard fixed-rate and variable-rate remortgage deals that do not include additional incentives.
Because of this defining characteristic, cashback remortgages often emphasise short-term gains. Therefore, it is crucial to thoroughly compare all available cashback remortgage products on the market before making a decision. Failing to do so might result in significantly higher monthly repayments, leading to an increased long-term cost.
Pros of cashback remortgages
Gain access to a lump sum that offers flexibility for personal spending, providing financial freedom.
The funds obtained can effectively ease the financial burden associated with home renovations or other endeavours, offering a practical solution to cover various costs.
Certain cashback remortgages go beyond the basics, offering additional perks such as fee coverage, enhancing the overall value and appeal of these packages.
Cons of cashback remortgages
The higher interest rates associated with cashback remortgages can result in increased monthly payments, potentially making the overall cost of the remortgage higher throughout the term.
Fees linked to cashback remortgages might be less competitive when compared to alternative options, impacting the overall cost-effectiveness of the arrangement.
Some cashback remortgages may impose stricter limitations on overpayments and early repayments, potentially leading to penalties such as early repayment charges (ERCs).
Should I get a cashback remortgage?
Choosing a cashback remortgage depends on how you balance between the allure of an immediate lump sum incentive and the consideration of potential long-term cost implications due to higher interest rates. For some, the appeal of having extra funds post-remortgage is key within their ideal solution.
Regardless of your inclination, we strongly advise consulting with a mortgage broker. Their expertise allows for a more in-depth exploration of all available products, ensuring you secure the most competitive remortgage deal tailored to your specific situation and circumstances.
We at The Mortgage Genie have a comprehensive understanding of the remortgage process 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 remortgages.
Every day we assist people by helping them to get their perfect remortgage product and guiding them through each 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 remortgage solution for you. And why not see how much you could borrow up to today by using our remortgage 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.