Home loan cash backs heat up, but are they worth it?

More than a dozen lenders are offering cash incentives for home owners willing to move their business to a new lender, with Suncorp Bank, Reduce Home Loans and 86 400 the latest to put cash offers on the table.

Suncorp Bank is now offering up to $3,000 to refinancers, plus an additional $1,000 for people working in essential services roles, such as doctors, nurses, teachers and police officers.

A total of 13 banks currently have cashbacks on offer, including three of the big four banks – CBA, Westpac and ANZ.

List of cashback offers on on a $400,000 loan

Note: Suncorp is offering $2,000 for loans below $750,000 and $3,000 for loans above $750,000. Reduce is offering larger cashback amounts for loans over $1 million. crunched the numbers based on someone refinancing their loan with $400,000 remaining to see whether they would be ahead or behind after picking a cashback special over one of the lowest rates in the market. Research Director Sally Tindall said while low rate loans were usually more cost-effective, the tide was turning as the bigger banks chase new customers more aggressively.

“Cashback specials are nothing new. They’ve been used for years as a clever marketing tool to grab people’s attention. What’s changed is the banks are starting to offer cashback on loans that also have competitive rates,” she said.

“Someone who refinances every couple of years to a competitively priced loan could potentially come out on top by taking up a cashback special.”

However, Ms Tindall pointed out that a low rate is almost certainly going to trump a one-off perk over 10 or 20 years – often by tens of thousands of dollars.

Calculations are based on the interest paid, plus upfront and ongoing fees, minus any cashback offered. 

“While the promise of cold hard cash is hugely attractive for anyone juggling the bills, people who put the money back into their mortgage will see even bigger savings as it will reduce their interest charges every single day,” she explained.

“It’s great to see Suncorp giving some extra cash to new customers who work on the frontline as a thank you for their service over this challenging time.”

Before refinancing for a cashback deal, make sure you check the following:

  • Is the interest rate competitive (the lowest variable is 2.29 per cent and the lowest fixed is 2.09 per cent)?
  • Read the terms and conditions carefully to make sure you’re eligible for the cashback.
  • Are the fees high? (some banks charge no upfront or ongoing fees). Ask the new lender to waive them if there are.
  • Does the loan offer the flexibility you need? (like an offset account, ability to make extra repayments).
  • Are you in a position to refinance? This may include having a steady job, having a good amount of equity in your home, etc.
  • Can you put the cashback bonus into your mortgage? Extra repayments help reduce your interest charges over the years to come.

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