The Fine Print of Home Loan Offers and Cashback

24th Jun, 2020 | First Home Buyer, Refinance

In this article:
Here's what you need to consider while opting for a home loan offer or cashback

Off late banks have been rolling out several offers and cashback options to attract borrowers. While it’s a great idea to keep track and benefit from them, it’s equally important to ensure that they don’t result in a compromise on more important mortgage features. Here’s a quick guide on all you should keep in mind while considering a cashback or home loan offer.

The various options

Cashbacks and offers come in many forms ranging from a direct bank account transfer to add on products.

  • Lower Interest rate: Some lenders are providing a lower interest rate for a short duration as part of the offer. It is essential to understand two aspects of such a kind of offer. The first is to know the period the lower interest rate will be applicable for. Secondly, once the offer period ends, what interest rate would the lender revert to.
  • Direct account deposit: Some lenders typically deposit money into eligible borrowers’ accounts once they complete the mortgage process as per terms and conditions within the offer’s stipulated period.
  • Discount Fees: Another form of a cashback could be lower fees or complete waiving of the processing fee altogether. With processing fee usually being an upward of $500, this could imply a good saving.
  • Add-on products and features: A lot of lenders offer to add on products like discounted insurance, free credit cards or maybe even a free trip.

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The non-negotiables

While opting for an offer make sure that your mortgage provides you with necessary features that suit your specific circumstances

  • Interest Rate: Have a clear idea of potential savings and repayment size. A mortgage is a long-term commitment. Ensure that a cashback does not result in you getting stuck with a home loan rate that is not competitive once the offer period ends.
  • Hidden costs: It may just be possible that the product offers a cashback only to make up for it with a higher repayment amount once the offer period ends. Have a solid understanding of all payment terms and conditions.
  • Processing period: A lot of lenders are taking longer than usual to process loan applications in the wake of stricter post-COVID requirements. This delay may result in missing a good property deal.
  • Flexibility and features: Each borrower’s circumstances are unique. Features like an offset account, the ability to fix a portion of the loan while keeping the rest on a variable rate may make a massive difference. Make sure that you do not miss out on some of these essential aspects due to a cashback.

The best way forward

The mortgage landscape is complex, and weighing the pros and cons of an offer versus long term benefits can get overwhelming. It’s best to seek professional advice. Go with a mortgage broker who can understand your requirements, scope the market and recommend a product that offers a cashback without a trade-off on essential long terms benefits.

In conclusion, a cashback needs to be viewed as a short-term benefit and should not lead to a compromise on the right mortgage product.

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