Could a cashback mortgage be right for you?
Over the last few months a number of leading lenders have introduced ‘cashback’ mortgage products. Sometimes linked to a fixed or discounted rate, these deals give you a cash lump sum when you move into your new home to help you with basics such as moving costs or furniture.
But are these deals worthwhile? And what are the pros and cons of cashback mortgages?
Clydesdale and Yorkshire Banks launch new cashback deals
Two of the UK’s leading lenders have become the latest banks to offer a cashback product. Clydesdale and Yorkshire Bank have launched a £1,000 cashback mortgage for homebuyers, along with a number of new mortgage rates.
FT Advisor reports that ‘the new cashback offer is available across a range of new and existing fixed- and variable-rate mortgages for both first-time buyers and those moving home.’
Deals include a five-year fixed rate product at 2.79%, available to 75% loan to value. At 85% the rate rises to 3.49% and at 90% the fix is at 3.99%. There is a £999 arrangement fee for new customers or a £499 fee for existing borrowers.
In addition, the banks will provide £1,000 cashback on completion. The cashback offer will run until the end of February 2015 and is available for those borrowing between £50,000 and £1million.
Steve Fletcher, head of Clydesdale and Yorkshire banks’ retail network, said: “We are providing a range of mortgages to meet the different needs of buyers at different points on the housing ladder. This £1,000 cashback offer and the new rates are clear examples of support for homebuyers, whether they are looking to buy their first home or take the step to the next rung.”
The pros and cons of a cashback mortgage
Cashback deals can provide you with a useful lump sum when you move into your new home. The lump sum can help you to meet stamp duty or moving costs or can be used to buy essentials such as carpets or furniture.
However, the interest rates charged on cashback mortgages are often higher than other fixed or discounted deals that are available in the market.
Keith Osborne, editor of Whathouse.com, says: “If you’re considering a cashback mortgage, be careful not to be swayed by the amount on offer. Lenders often use cashback as a gimmick to entire borrowers when actually they would be better off taking a cheaper deal elsewhere.
“Always look at the total cost of any deal before committing. For example, you may well save more money choosing a lower rate than you do by paying more every month and taking a small cashback sum.”
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