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About Cashback Mortgages
Cashback mortgages give you a lump sum payment when your mortgage commences.You can compare the latest interest rates on cashback mortgages using our comparison tool.
Think carefully about securing debt against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
What is a cashback mortgage?
A cashback mortgage offers borrowers a cash lump sum once they complete on their new home or finalise their remortgage. Cashback mortgages usually pay out the money before monthly repayments start, so they can be a good way to deal with initial expenses.
How does mortgage cashback work?
When you consider a cashback mortgage, your prospective lender will tell you before you apply how much cashback you will be paid as part of taking out the product. This money is then paid out after you have completed your purchase or finalised your mortgage.
Once you have been sent your mortgage or remortgage cashback, you are free to spend it on whatever you like. It may be useful for any purchases related to moving or improving your home, but it is not a condition of the payment.
If your chosen cashback mortgage comes with charges if you want to overpay on a fixed- mortgage, you may find that the money you gained through the cashback is quickly overtaken by the fees you would need to pay for making an overpayment.
Can I get a cashback mortgage?
You will need to meet the lender’s specific criteria for the cashback mortgage you want to apply for. This might require you to already be a customer with that bank or hold a specific current account, while some lenders offer cashback mortgages exclusively to first-time buyers.
If you already own your home, remortgage cashback may also be available. You may find this is an option you want to consider if your current deal is coming to the end of its deal period. However, there may be standard remortgage deals, which offer a lower interest rate or are cheaper overall.
Are cashback mortgages a good idea?
Cashback mortgages will work for some borrowers, but not for others. It can be a way to get a cash boost for the expensive task of moving home, but it is likely to land you with a higher interest rate that means you pay more in the long run.
Whether a cashback mortgage is right for you will depend on the particular circumstances of your move or your remortgage. It will also depend upon the interest rates you are offered on cashback mortgages and standard mortgages – essentially how much extra you will pay in order to get the cashback.
A seemingly small interest rate rise can make a big difference, especially if your mortgage has a long fixed term, such as five years or more.
It is important to think about how badly you need the cash and what you need to spend it on.
What are the benefits of a cashback mortgage?
Buying a house can be expensive and receiving a cash lump sum on completion can help cover some of the costs of being a homeowner, such as buying furniture or paying for renovations. A cashback mortgage can also help to balance out lending fees and conveyancing costs. It is still important to consider the overall cost of the mortgage and the initial interest rate you are offered, but that extra cash could be important to some home buyers.
What are the disadvantages of a cashback mortgage?
Cashback mortgages often have higher interest rates than their standard counterparts from the same lender, or different products from an alternative lender. You may therefore find that while you get a cash lump sum, you are then paying for that through a higher interest rate, or a product fee. Product fees can easily eat into some or all of your cashback mortgage bonus.
If the cash is not essential to your remortgage for house purchase, you may find that taking out an alternative mortgage with a lower interest rate is a cheaper option in the long term.
Cashback Mortgages FAQ
What is a cashback mortgage?
With a cashback mortgage, as the name suggests, you will receive some money back when your house purchase is completed or your mortgage is finalised. This could be a percentage of the mortgage or a set amount, which is paid as a lump sum.
Can I refinance my mortgage and get cashback?
It is possible to earn remortgage cashback when you refinance your mortgage. This may help if you are looking to make some home improvements or need to pay fees, but it can be an expensive way to generate cash. You may find that an alternative remortgaging option with a lower interest rate is cheaper in the long run.
Are cashback mortgages more expensive?
Yes, cashback mortgages tend to come at a higher interest rate so it’s important to work out whether the money you receive is worth the extra amount you will pay back each month as a result of having a higher rate.
What fees will I pay for a cashback mortgage?
Cashback mortgages usually feature all of the standard mortgage fees including an arrangement fee, valuation fee and legal fees although not all fees apply to all mortgages.
How can I compare cashback mortgages?
Our free mortgage comparison tool allows you to compare cashback mortgages by rate, fees and overall costs.
Are there any other special features I can get with a mortgage?
Lenders offer a variety of incentives to bring potential borrowers to their products. For example, you may see no-fee mortgages or offset mortgages when you use a mortgage comparison tool. No fee mortgages do not charge an upfront product fee to borrow the money, but may include a higher interest rate than a fee-charging alternative. An offset mortgage can help you pay less interest overall by linking your savings to your borrowing.
Joel Kempson is a personal finance expert and writer at NerdWallet. He has previously written for Money.co.uk and Uswitch, as well as being quoted in the Daily Express, The Mirror and The Sun. Read more
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Fluent Mortgages Ltd is authorised and regulated by the Financial Conduct Authority (FRN 458914), and is a registered company in England and Wales (company registration number 10978680), with a registered address at 102 Rivington House, Chorley, New Road, Horwich, Bolton, BL6 5UE