Looking for a cashback mortgage? Here’s what you need to know
The offer of a cash lump sum when you buy a home is often hugely appealing. The cheque comes just as you most need it, either to pay the fees associated with moving or to help to buy the essentials you need for your new home.
With more and more lenders offering cashback incentives, we look at the types of deals that are available and what you should bear in mind when considering this type of product.
Leading lenders launch attractive cashback mortgage deals
In recent weeks, a number of major UK lenders have launched cashback mortgage deals. Halifax has said that it will give £1,000 to first-time buyers and homemovers on qualifying deals, Skipton offers £1,000 cashback on its two-year fixed rate deal with no arrangement fee, while Clydesdale and Yorkshire offer £750 cashback to both purchase and remortgage clients as long as you borrow at least £75,000.
Having a cash sum available when you complete on your new home can help to fund the cost of your move. The Telegraph reports that Clydesdale and Yorkshire say that “the cashback is to help borrowers retain some cash from and manage some of the other costs involved in setting up a home.” But is a cashback deal always the right choice? We look at the options next.
“Tailor the product search to your individual situation”
As with all mortgage products, experts say that you should consider all aspects of a mortgage deal before deciding if it is the right product for you. For example, many lenders offer a range of other incentives such as a free valuation or help towards legal fees which may be more suited to your circumstances.
In addition, you will often find that deals that offer cashback come with higher interest rates. This means that you could easily end up paying more overall, even if you do benefit from a cash lump sum.
Mortgage expert David Hollingworth, says: “Lenders will often compete on rate but they understand that it’s not the only way to catch the eye of borrowers. Given the costs associated with buying a new home, offering a cashback can really help improve the appeal of a deal and we’re increasingly seeing offers of cashbacks that can range from a couple of hundred pounds to a couple of thousand.
“They can certainly work out to offer better value than a low rate with a big fee but it’s important to run the figures and tailor the product search to your individual situation.”
Consulting an expert can help you determine which deal is right for you. A qualified broker can look at all the deals available to work out which offers the most appropriate incentives. They can work out the overall cost of a deal – including your monthly repayments, arrangement fees and incentives – to establish which deal will be most cost-effective for you.