Cash Back, what is it and how do I get it?

“Cash Back” is an incentive/cash gift given to a borrower on settlement of new lending and sometimes for retaining business with a bank if all lending is up for review. But mostly it’s given to new borrowers to a bank or existing borrowers doing significant additional new lending.

It’s technically a cash grant towards helping pay (reimburse you) for things like lawyers’ fees, moving costs, paying another bank’s break fees when refinancing etc.

Your Cash Back usually gets paid the day of settlement or the day after, into the account you have set up to have loan payments deducted from.

Terms and conditions do a apply, such as keeping your loan with the bank for at least 3 years, otherwise you may need to pay some or all of it back if your loan is repaid early. Remember there is no such thing as a free lunch!

Interestingly this is not a new thing. 20 years ago, when I first started as an Adviser, Banks used to pay clients a legal fee reimbursement on settlement, typically $250-$1250 depending on the size of the loan. Nowadays these cash payments can be thousands of dollars.

Cash Back is usually related to the size of the loan, typically .70% – 1% of the loan amount. Low deposit borrowers can sometimes struggle to get Cash Back of any significant magnitude, but some banks have been providing around $5,000 for over $250k new lending for first home buyers in recent times. Other low deposit buyer options may have lower Cash Back but special rates.

It pays though not to get hung up on Cash Back, whilst one bank may have a generous offer, it’s interest rates may not be as competitive as other options.

That’s where the help of an Adviser comes in to see through the fine print and work out the most cost-effective option.

Cash Back can be useful to help refinance from one bank to another especially when legal fees and break fees are involved. If there is a few thousand dollars in break fees, another bank offering Cash Back to change your mortgage over and go on lower rates could put you in a better position.

Whilst it’s tempting to be influenced by these cash incentives, it always pays to chat to us so we can provide impartial advice on the pros and cons of any offer.