What is a cashback offer?
Home loan cashback is an offer that comes with your home loan, where the bank gives you a lump sum of cash which is deposited into your bank when the loan settles. These home loan offers can be very tempting: it's free cash, deposited in your account, so it almost feels like you've won money.
While there can be great deals which offer borrowers low rates and useful features on top of the free cash, you should look carefully at the offer details and the home loan itself, to make sure it's suitable for your borrowing needs before you sign on the dotted line.
A cheaper interest rate and minimal fees will save you more money than a one-off $1,000 cashback payment in the long run, so be sure to know if a cashback offer is right for you.
How does refinance cashback work?
Many banks and lenders offer cashback specifically for borrowers who are refinancing their home loan. This is usually for borrowers who are refinancing from one lender to an entirely new lender, and not for borrowers who are refinancing within the institution they already hold their home loan.
Although cashbacks can be enticing, they should not be a reason to refinance your home loan to a specific lender. You should always check the interest rates, other fees and loan features. You may find that a lender without a cashback saves you a lot more money and provides more helpful loan features. Read more in the sections below to see exactly what to look out for and when cashback offers are worth it.
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 4.95% 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 4.50% interest rate.
- The comparison: You look around and see a few loans with a similar 4.50% rate but no cashback, so you go for the one that gives you $2,000. Makes sense, right?
But then you realise it's a package loan, so you get a credit card and an offset account with the loan, plus a home insurance policy. This all comes with an extra $400 annual package fee.
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.
It may not be worth it. If you switch to a similar loan with a 4.50% 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 borrowing needs.
Compare a wider range of mortgages here
Top cashback offers in June 2023
Banks don't offer cashback incentives all year round so this list will sporadically change. If you're looking at refinancing or buying a new home, be sure to check this page to see what's on offer.
Here are some of the biggest cashback offers available this month:
|Lender||Cashback amount||Borrowing criteria|
|Bank of Melbourne||$2,000||Refinancers|
|Greater Bank||$3-4,000||New purchase and refinance|
What kind of special offers do lenders provide?
Here's a quick run down of the most common types of home loan offers from Australian lenders.
Many lenders will deposit your cashback payment into your account once you settle your home loan. This is becoming an increasingly common offer for refinance customers, as lenders fight hard to get existing borrowers to switch to a new lender.
Cashback offers tend to be worth between $1,000 and $4,000 and often come with a few conditions. These can include:
- 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.
Always check the cashback offer's fine print to see if you actually qualify. These offers can be very confusing to navigate.
Cashback offers are enticing because it feels like free money. But you always need to check that the loan itself is a good deal regardless of the cashback. Don't let the thought of "free" money distract you from doing the hard work of home loan comparison.
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.
Compare introductory variable rate loans
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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