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  • Writer's pictureMegan Birot

Best Home Loan Cashback Offers & Deals (May 2024)

Updated: May 1

Key takeaways: Cashback offers

  • Home loan cashbacks can range between $1,000 - $3,000 or higher.

  • They’re typically offered to eligible refinancers and first-home buyers.

  • Home loans with cashbacks may sometimes conceal a higher interest rate. 

What’s a cashback?

Cashback deals on home loans are ‘cash sweeteners’ some lenders and banks offer to attract new customers, namely refinancers (people looking to switch their home loan to a new lender). Select lenders also offer cashback incentives for first-home buyers to win their business. Home loan cashbacks can vary from $1,000 to $3,000 or more, depending on the loan amount.

How cashback home loans work

Cashbacks are typically paid as a lump sum into the transaction account linked to your new mortgage - usually within 30-60 days after settlement. If you have a fixed-rate loan, it may be rebated towards your prepayment threshold (the maximum extra repayments you can make over the fixed period) For joint applications, the cashback will be paid to the primary applicant.

Are you eligible for a cashback home loan?

Cashback offers are exclusively available to new customers — commonly eligible refinancers — who meet the lender’s cashback requirements. This means you might not qualify for a bonus if you're refinancing a loan with the same lender or within the same network of lenders. For instance, you might not be eligible if your existing mortgage is with Westpac and you want to refinance with St. George (a subsidiary of Westpac) to score a cashback. Additionally, first-home buyer cashbacks are available from select lenders in Australia. 

What lenders consider assessing your eligibility for a cashback

The type of loan you apply for

Lenders only offer cashbacks on select mortgage products, namely owner-occupied and investment home loans. Some lenders may offer the option to refinance to a fixed rate or variable rate home loan, but not all.

Your mortgage amount

Cashback offers have a minimum loan amount of $200,000 - $250,000. This means you wouldn't qualify if you’re refinancing a smaller loan amount. 

In addition, some lenders offer different cashback amounts based on the size of your mortgage. For instance, ME Bank offers up to $2,000 cashback for loans up to $400,000 and up to $3,000 for home loans over $700,000. Reduce Home Loans offers up to $10,000 cashback for home loans over $2 million. 

Your LVR

Most lenders require you to have a loan-to-value ratio (LVR) of at least 80%. This is your loan amount shown as a percentage of your property's value. The formula for calculating your LVR is: loan amount ÷ property value x 100 = LVR.

If your LVR was above 80%, you’d likely have to pay LMI again when refinancing, which would offset any cashback benefits.

Your mortgage must settle within the lender’s specified time frame

Another condition lenders may apply is that your cashback home loan must be settled within a specific time frame — typically within 120-180 days from applying. This might include requirements like remaining with the lender for a specified period of time after receiving the cashback or having to open a linked transaction account to be eligible.

Is a home loan cashback offer worth it?

Cashback deals can provide a short-term boost to your savings and help offset some of your refinancing costs, but may sometimes conceal a higher interest rate. This can quickly offset the benefit of a cashback, often within a few months. This is when a cashback may not be worth it, considering homeowners may only refinance their mortgage every few years. 

If you set and forget your home loan, you’ll end up paying more in interest over time compared to refinancing to a home loan with a slightly lower rate but no cashback. 

Generally, a lower interest rate will save you more money than any refinance cashback offer. 

When a cashback deal is a dud 

This hypothetical example shows how quickly a cashback home loan with a slightly higher interest rate can offset the benefits of an upfront cash incentive. 

  • Your current mortgage: Suppose you still owe $600,000 over 25 years on your mortgage at a rate of 6.00% p.a. 

  • The cashback deal deal: You’re considering a $2,000 cashback home loan with a slightly higher interest rate of 6.05 % p.a. You calculate that’s only an extra $19 in monthly repayments and you figure the cashback deal is worth it. 

  • The fees come in: You’ll need to pay discharge fees on your current mortgage, plus valuation and establishment fees on your new home loan — totalling about $1,000. Half of your cashback is already gone. Your new cashback home loan also comes with a $495 annual package fee.

  • The dud deal: In just about 12 months, the extra repayments on your cashback loan and the $495 annual package fee have eaten your cashback, and you’re stuck paying a higher rate. Now, you're contemplating refinancing your home loan to a lower rate, but you’ll pay more fees in the refinancing process. 

What to look out for if you’re applying for a cashback home loan

The interest on the cashback home loan

Is the interest rate on your cashback home loan more competitive than your existing loan? Or at least, is it in line with the rates other lenders in the market are advertising? As with all refinancing, are you actually saving money without the cashback?

Mortgage fees

Take into account the fees associated with discharging your current mortgage, and the set-up fees for your new home loan, including any annual package fees. Make sure those fees don’t eat away at most of the cashback.

Home loan features

Does the cashback home loan come with features to offset the interest on your mortgage? As a minimum, consider an offset account and redraw facility. The cashback should never be the only good feature your new home loan offers. 

What your current lender may be able to offer

Can you haggle a lower interest with your current lender without switching? This could save you both interest and the trouble of refinancing, plus any fees associated with switching home loans. 

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