Are cashback offers worth it?
So you are looking around considering refinancing your home or investment loan and all of sudden your see an offer for $2,000 cashback to refinance – Wow, that’s great, let’s take it…
But then you see another offer for $3,000 and then $4,000. What is going on you ask? Is this real money or are the banks just throwing around some Monopoly money?
Are banks really that desperate to “buy” your business?
Well the answer is categorically YES.
The downturn in the lending and housing markets has seen our Aussie lenders looking for ways to bolster their home loan books. At the end of the day, banks make money when they lend it.
So they’ve turned to offering cashback incentives to effectively “buy” your business and in many instances, if you can get it, then it’s a little bonus that may not have factored in as part of your refinancing consideration.
Let me explain
OK, so let’s assume that you have a $500,000 mortgage that you are looking to refinance. Your current home loan interest rate is 3.35% and you see an offer where you can reduce your home loan interest rate to 2.95%.
So far so good as the 0.4% interest rate saving will save you $2,000 per annum or $167 per month in interest.
And now, let’s say we have taken that to a lender offering you a cashback offer of $3,000. Great result as that’s an extra $3,000 you didn’t have before.
So in your 1st year, you can pocket an extra $5,000 from interest savings and cashback – it just makes sense.
What should I be wary of?
This is a great question.
Obviously we wouldn’t want to put a cashback offer as a short term win, over the long term interest rate savings. I would always hazard against taking cashback over long term savings i.e. take a cashback offer instead of the cheaper interest rate.
And if you couple these offers with some fixed rate offerings for owner occupiers in the low 2% range and investment loans in the high 2’s or low 3’s these can make up substantial savings.
My only advice to finish is to start with the end in mind. What I mean by this is don’t jump to a special offer of cashback and a fixed rate without considering your circumstances.
Let us discuss your options when considering these offers.
Andrew Mirams is the Founder and Managing Director of Intuitive Finance, a highly respected and multi-award winning Mortgage Brokerage dealing with clients all over Australia and around the world. Andrew has over 30 year’s experience in the finance industry and has assisted clients to secure over $2 Billion in mortgage lending over his time. Intuitive Finance deals with all aspects of lending from helping first homebuyers, someone wanting to upgrade their home or starting out and experienced investors looking to secure that next investment property, we can assist with all those requirements. We also specialise in working with self-employed clients and getting them the best outcomes, along with Commercial and Asset finance solutions. Intuitive Finance is highly regarded in the industry and has been recognised as a national winner of the MFAA customer service award and also one of the finance industry’s top mortgage employers. Our brokers also feature regularly in the Top 100 mortgage brokers list in Australia.