What is a Cashback Mortgage?
Cashback mortgages offer the incentive of a cash bonus when signing up to a mortgage. With so many costs associated with moving to a new home, a lump sum of cash can be very useful especially for a first time buyer. Remember though, if it’s too good to be true, it usually is!
How much cash will I get?
The amount varies from perhaps a few hundred to several thousand pounds and will usually be paid once the mortgage has started. Sometimes the amount that will be paid out is based on a percentage of the loan being taken. In other cases lenders have previously offered to pay stamp duty on your behalf or perhaps legal fees and even council tax for a period of time!
Advantage of a Cashback Mortgage
A lump sum of cash could make all the difference if you are struggling to find enough money to pay mortgage fees, stamp duty or even items for your new home. And if the cash offer is significant, it could work out to be a good deal, even with higher interest rates.
Disadvantage of a Cashback Mortgage
The main disadvantage is your interest rates are likely to be higher than with other mortgage types so it could cost you more in the long run, even with the lump sum of cashback. Do your maths well!
Final Considerations
The idea of getting ‘free money’ can be very tempting but be aware that a cashback mortgage might not offer the best rate and could end up costing you more in the long run. We have frequently seen cashback mortgages that look exciting and competitive at face value but once the figures have been analysed they often end up being much worse than expected.
Look into all your options before you make a decision and make sure you’re aware of the different mortgage types available. Speak to one of our qualified advisers now for some expert advice, for free.
