Cashback refinance offers

What is cashback refinancing?

Cashback refinancing is where lenders offer a lump sum of cash as an incentive to refinance with them. For example, a lender who we’ll call ‘Bank B’, might offer you $3,000 as an incentive to switch your home loan from ‘Bank A’ (your current lender) to them, Bank B. Then once the loan has settled with the new lender, you’ll receive the $3,000 cashback.

How does it work?

Refinancing is the process of switching from one loan product to another, usually to take advantage of a more competitive interest rate or better terms on offer from a different lender. The typical process is that you use the proceeds from your new loan to repay your existing loan, and then you begin making repayments to your new lender.

As mentioned earlier, you’re usually only able to access the money from the cashback offer once your new loan has settled.

Are they only available for a limited time?

Just like any company running a promotion, any single cashback refinance offer may only be available for a certain window of time. But don’t feel pressured to make a decision just because the offer will expire. Lender’s often run cashback refinance offers, and it’s important to take the time to understand if the offer as a whole makes financial sense before making a decision.

Why would someone take up a cashback offer?

A cashback offer can be a tempting prospect, but it’s important to do your homework to ensure the refinance offer makes financial sense and isn’t going to end up costing you more in the long run. Sometimes, cashback offers can distract borrowers from ongoing fees, or a higher interest rate.

That said, it could make sense to take advantage of a cashback offer if the sum of cash being offered, as well as the interest rate, fees, and features of the new product you’re switching to lead to more savings versus your current product.

How much money can you get as ‘cashback’?

Cashback refinance offers very often differ between lenders, and can range anywhere from hundreds of dollars to thousands of dollars.

What are some of the things to consider before refinancing?

As mentioned earlier, the idea of receiving cash just for refinancing can be a very tempting prospect. But as the saying goes, there’s no such thing as a free lunch, which is why it’s important to do your due diligence before making a decision.

Here are some factor to consider when assessing whether or not a particular refinancing offer makes sense for you:

• The comparison rate: This is the total cost of the loan, and takes into account the interest rate, loan term, and fees. It’s important to compare comparison rates for any product you’re considering against your current loan to ensure you’re getting a good deal.
• Fixed or variable: Is the new product a fixed rate or variable rate product? And does the lender offer the ability to split the loan into half fixed, half variable?
• Break-fees: These are the fees you’ll need to pay to your existing lender to break your mortgage contract. They typically only apply for breaking the terms of a fixed rate home loan (e.g. by refinancing before the end of the fixed period).
• Any new fees: These are any setup, administrative, valuation, or ongoing service fees charged by your new lender.
• Loan term: The longer the loan term, the more interest you could end up paying, so switching to a loan with a shorter term could help you save.
• Payment frequency: It’s important to ensure your repayment frequency aligns with your cashflow to ensure you’re not hard-pressed to manage your repayments.
• Additional features: Different loans come with different features, such as offset accounts and redraw facilities, which can add flexibility to your loan, and even help you minimise interest repayments. For this reason it’s important to know you’re not foregoing any features that you value when switching products.
• Lender’s Mortgage Insurance (LMI): If your loan to value ratio is over 80% then you may need to pay Lender’s Mortgage Insurance again with your new lender, as it’s not typically transferrable.

Do I have to take up a cashback offer in order to refinance?

Absolutely not! You might find a terrific refinance offer without a cashback incentive, which has an attractive interest rate, or offers the features, loan terms and flexibility you’re looking for. This is why it’s important to weigh up all the costs of any potential loan versus your current one, and assess whether it makes financial sense.

Do cashback offers come with eligibility criteria?

As with almost all home loan product, cashback refinance deals can come with eligibility criteria. Some of these can include:

• Your credit rating: As with any credit product, a history of failing to make repayments or even defaulting on loans could hurt your eligibility to refinance.
• The loan to value ratio (LVR): some lenders may only offer cashback refinance offers for loans with a certain LVR limit.
• Investment or owner-occupied: Whether the property is an investment property, or owner-occupied could be affect your eligibility for certain offers.
• The loan size: some lenders may only offer cashback refinance deals for loans over a certain size.
• Your lender: Some lenders only offer cashback refinance deals to new customers, not existing customers.

Where can I compare cashback refinance offers currently in market?

With so many bank and non-bank lenders in the market, comparing cashback refinance deals can be a daunting and time-consuming task. That’s why at iSelect we’ve partnered with Lendi who make the process of comparing home loans products with the goal of refinancing simple.* With Lendi you can compare a range of home loan lenders and products, including available cashback refinance offers, to find a loan that suits you.

Compare cashback refinance offers with iSelect & Lendi*

As we mentioned earlier, comparing available cashback and other refinance rates can be an overwhelming task. That’s why we’ve partnered with Lendi to make it easier for you to compare home loans, and switch to a product that suits you.* Get started comparing home loans from 35+ lenders online the easy way, or give Lendi a call on 1300 186 260 (08:30-18:30).

Last updated: 6/12/2021