You might have heard the word “cashback” floating around recently. With Banks bidding for your business given the current situation, it’s no wonder they’re pulling out all the promotions they need to, to get you to switch over to them through refinancing. So what exactly is a cashback incentive and what is it all about?
What is a cashback?
A cashback incentive is a marketing promotion meant to attract new customers to switch to a new service. In regards to the banking and lending industry this means offering customers money in return for becoming their customer. As the COVID-19 crisis continues to ripple effect in all industries, the incentive is one of the key ways lenders are hoping to entice customers to do business with them so the former can keep afloat.
Currently, banks have been seen lending between $1000 and up to $4000 worth of cashback incentives to new customers. The cashback offers are more so for refinancers rather than new customers, and given that interest rates are at an all time low, the incentives seem more attractive than ever. But what’s the catch? Read on to find out:
Am I eligible?
Don’t be fooled by the attractive offers because most of these incentives do come with a fine print. Your eligibility will depend on a number of factors but broadly speaking, there are deadlines your application has to meet and minimal loan amounts you can apply for.
Below are some of the criteria that apply to anyone looking to refinance. The fine print differs depending on lender however some lenders are offering a cashback if:
- You refinance online
- You refinance through a mortgage broker
- You are refinancing on an Owner-occupier or Investment Loan
- You refinance under certain packages
- You choose to make principal + interest repayments
- Meet the minimum or maximum loan amount range
- Apply and settle by a certain date
Alternatively, your lender will not offer you the cashback if you refinance:
- With an interest only loans
- Internally with the same lender
- Or internally under the same lender group (for instance under Westpac group which includes St.George, Westpac, Bank of Melbourne, BankSA and RAMS).
How is the cashback offer structured?
There are a few ways the bank gives new customers cashbacks:
- Per customer: You’ll receive one cashback regardless of how many loans you apply for.
- Per application: You’ll usually receive a cashback per application (this could be limited to certain cap).
- Per property (security): You’ll receive a certain cashback amount per property included in your loan application and maybe even a bonus!
When will I get the rebate?
Once you have refinanced you can generally expect to be paid the rebate within 30 to 90 days of loan settlement. The time frame will differ according to the lender, however most will pay the cashback into the transaction account linked to your home loan account.
What can I use the cashback for?
Once you’ve been paid the cashback you can use it for anything you want! You could put it towards paying off your home loan, to put back into your savings to reimburse you for the upfront costs of refinancing, or to make any other purchases you’ve been holding off.
What’s currently on offer?
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How do I know I’m switching to a competitive lender?
While the cashback offer from one lender may seem more attractive than the other, it’s important to make sure you’re getting the best and most competitive deal. When it comes to comparing the offers by refinance lender, here is what you should consider:
- The interest rate (both during and after the introductory period offer)
- The loan features offered to you (for instance, redraw or offset facilities)
- The annual fees you may be required to pay for specific home loan packages
- And lastly, the cashback amount
The offers may vary greatly, however a general rule of thumb to follow when deciding who to refinance with could be to choose the lender or option that saves you the most amount of money in the long run.
What else do I need to know?
As mentioned earlier, the fine print for each refinance offer varies depending on the lender. Some state that tax consequences may arise from the promotion, while others state that refinancing multiple times within a set time frame is prohibited. For certain periods, lenders may be offering cashback bonuses so be sure to check that out too or to talk to your mortgage broker about when the best time to refinance is. Lastly, most of these cashback offers are subject to change without notice so make sure to keep up to date with what your desired lender is doing when it comes to offering refinance incentives.
Should I refinance for the cashback?
If you’re solely refinancing for the cashback only, it may be best to find other avenues for getting some (relatively) quick cash. However, if you were already looking to refinance and haven’t had the time to do so yet, now might be the most beneficial time to consider finalising your plans. With low interest rates and higher than usual cashbacks, refinancing now could improve your financial situation in the long run. As always, if you’re unsure about where to go from here, or don’t know if refinancing is the best course of action for you, it may be best to speak to a financial advisor or mortgage broker to narrow down your options.