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Some lenders give you a cashback when you get a home loan with them. Cashbacks are usually worth between $2,000 and $3,000, and are mainly a way of encouraging borrowers to switch to the lender from a competitor.
Home loan cashbacks are extra money, deposited into your account. Cashbacks have conditions attached, which borrowers need to meet:
Loan amount. Most cashback offers specify a minimum loan amount. If you're refinancing a small loan amount, say $100,000, you might not qualify.
Time limit. Cashback is usually offered for a limited time, specifying that you have to apply by a certain date and have the loan settled by a certain date.
Loan purpose. Some cashback offers are limited to refinancers, or are specific to homebuyers only (and not investors).
Account. You usually need to open a transaction or savings account with the lender in order to receive the cashback.
You need to meet the eligibility criteria, such as the type of loan and the amount you're borrowing. Once the cashback comes through, your lender will deposit it into your bank account.
Is a home loan cashback offer worth it?
Sign-up bonuses and cashback are attractive side benefits of a loan, but don't get too distracted by them. If the loan itself isn't a good product for you then the bonus just isn't worth it.
When comparing mortgages ask yourself this question: if I took away the special offer, would this loan be right for me?
A lower interest rate will save you more money than a cashback offer in most circumstances. A mortgage with features like an offset account and flexible repayment options can also help you save money.
Always look at the following when examining home loan special offers:
Interest rate. Does this loan have a competitive interest rate? Will it save you money even without the sign-up bonus?
Period of offer. How long does the sign-up offer last? For instance, if the loan offers a special rate for the first year, you need to think about what happens after that first year. Will the loan revert to a higher rate?
Loan features. The sign-up offer should not be the only reason you are choosing a certain home loan. You need to take into account all the features offered by the loan and whether they suit your needs and situation.
When a special offer doesn't make sense
Here's a hypothetical example of a refinance cashback offer that looks enticing but doesn't really benefit the borrower.
Your current loan: You're currently on a 6.25% interest rate with $300,000 left on your loan.
The offer: You see a package home loan with a $2,000 cashback and a lower 5.90% interest rate.
The comparison: You look around and see a few loans with a similar 5.90% rate but no cashback, so you go for the one that gives you $2,000. Makes sense, right?
But you don't want the offset account or the credit card, and you're currently getting a better deal on your insurance elsewhere. And that annual package fee? Well, in just 5 years it's eaten up the full $2,000 cash back.
If you switch to a similar loan with a 5.90% rate that doesn't have a $400 annual package fee, you'll be better off. Of course, if you made use of all the products in the package then the fee might be a small price to pay for the convenience of having all your products with one institution.
It all depends on your needs.
Getting your hands on a cashback offer for your home loan can be extremely handy. Buying a home or moving house can be extremely expensive, so having some funds at hand to cover costs like removalists or new furniture can be great. And hey -- you could even funnel it back into the loan in order to get it paid off more quickly too!
What other kind of special offers do lenders provide?
Beside cashbacks, lenders also offer a few other special benefits on home loans.
Fee reduction or waived fees
Many lenders will waive or reduce fees for a limited time. Given that application fees can cost $600 or more, this is a decent saving. As with home loan cashbacks, fee waivers usually have exclusions and eligibility criteria, such as time limits and minimum loan amounts.
Discounted interest rates
Discounted rates can save you a decent amount of money in the early stages of your loan. Be sure to compare the discount rate to other offers and watch out for the end of the offer period, when the rate will rise.
Some lenders allow you to package things like credit cards, savings accounts and offset accounts with your home loan account. You can save by paying a combined annual fee for all products you've chosen to package, as well as enjoy the convenience of having all of your finances in one location.
Frequent flyer points
Some lenders have partnerships with frequent flyer rewards programs. The points you can gain from these loans can equal enough to cover an international flight. You can learn more about frequent flyer loans in our guide.
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Frequently asked questions about home loan cashback offers
In recent years many lenders offered cashbacks as high as $4,000 for refinancers. These days the highest you can generally get is $3,000, with more lenders offering $2,000 cashbacks.
But this may change in the future.
Yes. Most home loan cashback offers on the market are targeted at refinancers. That is, borrowers who already have a home loan and are looking to switch lender.
A home loan cashback gives you extra money. It's a tempting offer, especially if you were thinking about refinancing anyway.
There's only a downside if you focus too much on they cash and forget about the loan itself. In other words, make sure it's suitable home loan for your needs that has a competitive interest rate and minimal fees.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
Refinancing your home loan can get you a better interest rate, adjust your loan term and take advantage of new features, but there are some things to look out for to make sure it's the right decision for you.
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