If you take out a new loan, you may be able to get money from the bank.
Glen McLeod is director of Edge Mortgages. It will answer readers’ questions about home loans, whether you’re a newbie just entering the market or someone who already has a loan and is wondering how best to handle it. If you have a question, email [email protected]
Q: Is cashback still valid? I’ve heard of people being offered thousands of dollars when they take out a home loan – is that still available? How do we access it?
A: I’m happy to say that cashback is still a thing. Banks offer incentives on new loans or refinancing from another institution. But cashback comes with a hook. Be aware that you will have to stay with this lender for up to four years, otherwise they will ask you to pay back.
There have been campaigns recently where the lender offered 1% cash back on the loan amount borrowed up to a maximum of $20,000. Some of these campaigns are coming to an end. But that doesn’t mean there won’t be cashbacks in the future.
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The concept of cashback has been around for quite some time. Originally, it was a contribution to legal costs and was generally capped at around $1,500. However, in recent years it has been used as a major marketing incentive to help customers switch banks free of charge. Cashback effectively helps to pay legal fees as well as breakage fees that may be incurred by breaking fixed interest rates.
Over the past two years, as interest rates have fallen, there have been minimal to no break costs, so customers have been able to keep what was left of the cash back, after legal bills have been paid.
Some people have used it for a first payment, moving expenses or even vacations.
But now, with interest rates rising, breaking a fixed rate will likely come with a higher cost of breaking.
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You can access cashbacks by taking out new loans from a bank. This new loan can be a refinance with another bank or a completely new purchase. Cashback can be granted whether you go directly to the bank or through your mortgage adviser. Non-bank lenders generally do not offer these incentives.
Remember that if you buy a property and plan to sell it quickly, there is a payback period on the cash back. You may have to repay some or all of the cash back that was provided, depending on how long your loan has been with the provider.
In some cases where a client sells their existing home and purchases a new home, where settlement of both properties occurs on the same day, it may be preferable to replace one property with the other and keep the existing loan.
Because your interest rates may be lower than what you would get if you paid off one loan and took out another at new rates. This type of situation may mean that you will not get cashback.
The best suggestion I can give you is to contact a qualified mortgage advisor and discuss the best option for you. Our job is to ensure that you get the best possible result, whatever your personal situation.