Compare home loan cashback offers

When searching for a home loan in Australia, you may have come across the term ‘cashback’. Cashback deals are when a lender offers you cash, generally between $1,000 to $5,000 (or higher), when your loan application is approved.

It is a common way that lenders can entice new customers on to their books. The cash is generally deposited into your nominated bank account upon application approval. It may also be offered in the form of a gift card or subtracted from your loan balance.

With the home loan market being highly competitive, lenders offer up cash-in-hand deals like this for a limited time to encourage new customers to join with them over other competitors. The lender gains a new customer, and the customer gains some cash to put towards their mortgage or new property.

Cashback deals are generally available to both owner-occupiers and refinancers. Currently, cashback home loan offers are being mostly targeted towards home loan refinance. However, they are not just limited to refinancing, with a few cashback deals on offer to first home buyers as well.

There are a range of benefits of cashback home loan deals, with the most significant being that they may help to pay for some of the upfront costs of taking out a home loan or refinancing, such as fees for home loan applications or discharge fees from your previous lender.

How a cashback offer may benefit you will depend on how you choose to spend the funds. A cashback deal may also be able to help pay for additional upfront costs, such as lender’s mortgage insurance (LMI) or even stamp duty. Further, it may be able to pay for your moving costs or even bolster your renovation fund.

Benefits of cashback payments:

• Pay for upfront costs
• Pay for stamp duty
• Pay for lenders mortgage insurance LMI)
• Pay for moving costs
• Pay for renovations

It’s crucial to remember that there is more to a home loan than the perks being offered. This also includes features, like an offset account or redraw facility, or an introductory low interest rate that reverts to a higher ongoing rate after a year or two.

While having extra cash in your back pocket can be an exciting prospect, make sure you do your research and don’t just base your home loan choice on this aspect.

If a lender is offering a big cashback deal, but a high ongoing variable rate or annual fee, the cashback deal may not provide as much value in the long term. It may have been less expensive to choose a low-rate or low-fee home loan instead.

If having a cashback offer with your home loan is essential, take into consideration the interest rate and fees being charged as well when comparing your mortgage options. Use a Home Loan Repayment Calculator to calculate your potential payments (weekly, fortnightly or monthly repayments) with different cashback home loans and discover which one may best suit your budget and financial situation. This may help you to avoid any financial pitfalls with your mortgage.

As mentioned above, currently the majority of home loan cashback offers are for refinancing purposes only. While there are still some available for first home buyers, refinancers are being offered the lions share.

This is because the home loan market is currently in a period of historically low interest rates. Home loan customers are refinancing at record levels to take advantage of these rates and reduce their home loan repayments. Mortgage lenders are offering competitive cashback deals tailored to refinancers to encourage these customers onto their books.

Further, the cost of refinancing may be a barrier for some home loan customers. Break fees for fixed rate home loans, application fees with a new lender and more can climb into the hundreds, even thousands of dollars range. Offering a refinance cashback deal that, in theory, may cover these switching costs, is one way lenders can compete in the current battle for refinancers.  

Lenders may offer a few different home loan deals outside of the traditional cash-in-hand option. Whether you’re an owner-occupier or an investor, a lender may offer:

• Discounted interest rates
• Waived annual fees
• Waived LMI

First time buyers and younger Australians may seek out these offers due to having less savings or lower incomes (generally speaking). These perks can be an enticing option to consider if you’re trying to keep costs down after spending your savings on a home loan deposit. And investors may seek out cashback deals to help lower the cost of their investment, helping to keep their rate of return high.

Keep in mind that there is more to a home loan than the perks being offered and it’s worth comparing a range of factors about the home loan before you sign on the dotted line.

Firstly, when searching for your first or next home loan, you’ll want to use the comparison tables on this page to compare some of the key factors of a home loan, including:

1. Interest rates - One of the most significant costs associated with a home loan is the interest rate charged on the loan balance. Also take stock of the comparison rate, which is a combination of the interest costs and the home loan’s main fees into a single percentage. While it is based on a $150,000 loan amount over 25-years, it may help you gain an understanding of the ‘true’ cost of the loan overall.
2. Fees – Another component that may increase the cost of your home loan are the fees charged. This may include upfront fees like application fees, ongoing fees like annual fees and extra repayment fees, and exit fees if breaking a fixed rate loan or valuation fees (if refinancing).
3. Features – Lenders also may offer some helpful features, such as an offset account, a redraw facility or additional repayments without charge. If this flexibility is important to you, it may be worth comparing home loans that offer these features.

Some mortgage lenders may charge a higher interest rate or greater fees for cashback loans than for a ‘no-frills’ more basic home loan option. You may want to do some calculations to determine whether the benefit of cashback outweighs any of these additional costs. A Home Loan Repayment Calculator may come in handy in this process.

Finally, to help you narrow down your shortlist of options, you may want to look at the Real Time Ratings^TM score of each home loan product. Real Time Ratings^TM is RateCity’s world-first rating system that ranks home loans based on your individual requirements. Each product is given a score out of five, based on loan costs and flexibility. Unlike other comparison pages which rank their products once or twice a year, Real Time Ratings^TM results are calculated live, so they are up to date as possible.