Exploring mortgage cashback offers
We get clients asking about bank cashback offers spurred along by social media posts stating you can get $30k cashback if you switch your mortgage. That may be true if you have a $3m mortgage however in reality most banks typically provide up to 1% cashback of the value of the mortgage on a tiered basis with caps ranging up to $30k depending on the size of the loan and LVR position.
Most banks will advertise their first home buyer cashbacks on their respective websites typically offering a minimum $5k cashback with a minimum $250k loan which is great for covering lawyer’s fees and a few moving in costs etc. You’ll have to stay with the bank for 36 months or pay part of it back and of course most will want you to do all your banking with them.
For the rest, who are not first home buyers, incentives apply but its not as open. They’re not advertised on their websites and as mortgage advisers we receive regular rate card updates with the word ‘confidential’ written all over it so we can’t share sorry, no head-to-head going on here today. Subject to change, cashback offers come once a loan is approved.
We can however provide an overview, nothing specific, that says in general, most banks at the moment will stagger their cash backs from about 0.8% through to 1% with one building society going all the way to 1.25% with conditions. Then there are percentage mixes between residential owner occupied, investment property, new builds, and of course, variations between loans under and over 80% LVR.
End of the day, it comes down to case-by-case scenarios with a mix of outcomes depending on inputs, but rule of thumb is about 1% cashback based on the value of the mortgage, not $30k off the bat as some would make it seem.
Registering a security interest with a new bank also requires a solicitor, adding fees, some banks fast track it on dollar-for-dollar refinances however conditions apply.
There may also be a requirement for a registered valuation if the loan to value ratio ( LVR ) is close to 80%.
In the mortgage advising world, regulated by the Financial Markets Authority ( FMA ) who issue licenses to advisers, there are requirements for recording strong reasoning to switch mortgages, with the FMA keeping an eye on the incidence of ‘churning’ to ensure advisers are not just encouraging clients to switch mortgages to earn a commission, that its actually in the clients best interests to do so. An adviser can expect a call from their friendly FMA auditor if this is seen to be the case and is strongly discouraged with licenses on the line.
Switching mortgages can be beneficial in some instances, typically done at refix time, however the benefits need to be weighed up with the costs with full transparency.
To get some cut through on your particular situation, click on the link below.