Refinance cashback offers: Are they really worth it?
Looking at refinance cashback offers? Understand how they work, the real costs, and if they’re worth it before you make the switch.
We explain the potential benefits and drawbacks when it comes to refinance cash back offers.
If the word ‘cash back’ gets you excited, you’re certainly not alone! So it’s not surprising that refinance cash back offers can lead to many homeowners switching their home loan to a new lender in order to get their hands on a cash bonus.
But are refinance cash back offers actually worth it? Or is this a case of something that seems too good to be true?
As with any financial decision, refinance cash back offers come with benefits and drawbacks - and the right choice for you will depend on your specific situation and overall financial goals.
What are refinance cash back offers?
A refinance cash back offer refers to a promotion offered by a lender that gives you a cash bonus when you transfer your home loan to them from your existing lender.
The cash back amount in question can vary, often ranging from a few hundred to several thousand dollars.
The appeal of refinance cash back offers
Quick cash
Of course, the idea of getting your hands on an immediate cash bonus can be very appealing! Cash backs can offer a welcome financial boost, especially if you’re planning some home renovations or have debts you’d like to pay off.
The chance to review your home loan
Refinancing gives you an opportunity to reassess your current home loan, so you can potentially choose a better interest rate or more favourable loan features.
Short-term financial relief
A cash back offer can help to relieve some financial pressure in the short term, easing the stress of expenses or debts.
Drawbacks to consider with refinance cash back offers
Higher long-term costs
One of the main things to consider is the total cost of the new loan compared to your current one. If the interest rate is higher, even slightly, it can outweigh the initial benefits of the cash bonus over the long term.
Fees and charges
In a lot of cases, refinancing involves various extra fees - such as discharge fees, application fees, valuation fees, and potentially Lenders Mortgage Insurance (LMI) if you have less than 20% equity in your home. These costs can quickly add up.
Loan features and terms
You’ll want to do your homework and check if the new loan has less favourable terms than your existing loan. It’s important to consider the overall impact of these factors on your finances.
“Honeymoon” rates
Some lenders might offer low introductory rates that switch to higher rates after a certain period. Make sure you know what the long-term rate will be so you don’t get caught out.
Should you be swayed by a refinance cash back offer?
If you’re thinking about a refinance cash back offer, it’s crucial to consider all the factors involved before you make a decision.
Here are some tips to help you decide whether a refinance cash back offer is a good choice:
Crunch the numbers
Use a home loan calculator to compare the total cost of your current loan against the new loan, taking into account the cash back amount, interest rates, fees, and loan term.
Think about your financial goals
Are you looking for lower monthly repayments, a shorter loan term, or additional loan features? Make sure the new loan aligns with these goals.
Read the fine print
Take the time to understand all the terms and conditions associated with the cash back offer, including any obligations or criteria you need to meet.
Ask the professionals
Chat with a financial advisor or mortgage broker who can provide personalised advice based on your financial situation.
Refinance cash back offers can certainly be tempting, but deciding whether they’re a good idea in your situation relies on doing your research and making sure the new loan aligns with your needs, budget, and long-term financial goals.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Tax law is complex and subject to change. For the latest information, check the ATO website or with your accountant or financial advisor.
Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
