PHOTO: Home loan providers are providing refinancers thousands to switch to their product. But what’s the fine print? Photo: iStock
A bank handing you thousands in cash to refinance your home loan can sound like a sweet deal, but is it too good to be true?
A cash-back offer is a marketing incentive to entice consumers to switch to a provider’s product or service.
They are a great bonus, especially if you’re shaving down your repayments by refinancing to a lower interest rate. You can use the money for immediate purchases, or put it straight towards paying off your home loan.
Should you be wary of cash-back offers?
While the offer is attractive, it might not be worth signing up for a product solely for the cash-back offer, home loan specialist at Domain Home Loans Jake Ziegler said.
“The fundamental aspects of the loan – the interest rates, the fees, the features of the loan – are still really important considerations,” he said. “It’s really important to consider the overall cost savings of the product before you make the decision.”
Home owners who are refinancing should prioritise reducing their home loan repayments with a lower interest rate, rather than switching lenders for the cash in hand.
“For example, a customer with a loan size of $400,000 or a loan term greater than 15 to 20 years – the total annual fees and the slight decrease in interest rates with a bank that doesn’t offer a cash-back offer will still mean you’re better in the long run in terms of interest savings and fees. Which means more money back in your pocket,” Ziegler said.
What’s the fine print?
Lenders change their cash-back offers quite regularly. Home owners may find that an offer expires in a few months and therefore they will need to move quickly.