Are you looking to refinance your current home loan or investment property loan?

Are you starting to see offers of cashback for choosing to refinance to a particular lender?

If you’re wondering whether these sound too good to be true, that’s exactly what we’ll be covering in our latest update this week. Many lenders will from time to time offer various cash-back incentives with the aim of enticing you or your mortgage broker to choose their institution to refinance to. We will explore what you need to be aware of, how these cash-back offers work, and what to consider when assessing whether it’s a good deal or not.

Let’s start with what a refinance cashback offer is

A refinance cashback offer is simply a monetary incentive that is paid to you if you choose to refinance your home loan or investment loan to their institution. This could come in the form of a cash payment once your refinance settles, a reduction in ongoing fees, or even a gift card to a particular brand or store.

A refinance cashback will typically apply to both fixed and variable rate home and investment property loans, and also to both investors and owner-occupiers. It’s important to check the terms and conditions of the lender at the time as these could be subject to change.

How much are refinance cashback incentives usually?

A typical refinance cashback offer will be in the range of $1,500 to $4,000, with many lenders remaining in the $2,000 - $3,000 range. If you’re wondering why lenders need to offer a refinance cashback, it is simply to remain competitive in a market with increasing competition and choice for borrowers.

How do I know which lenders are offering refinance cashbacks?

This will vary from time to time, and lenders may also adjust the criteria to be eligible for their refinance cashback. It’s best to speak with your Loansuite broker to review which lenders are currently offering a refinance cashback and when you need to have applied by.

 Can Australian expats receive these refinance cashbacks?

Yes, they certainly can. If you’re an Australian expat, there are many lenders that will allow you to refinance to them and receive any refinance cashback offer that they may have on the table at the time. Simply being an Australian expat, and living and working offshore, doesn’t impact your eligibility to receive this particular cashback.

Let’s review how you can tell if it’s a good deal or not

There is a lot to consider in reviewing whether a particularly refinance cashback offer with a particular lender is worth your time, or going to end up costing you more in the long run. You may find, for example, that it provides you with a short-term cash boost but ends up costing you more in ongoing fees and charges.

In reviewing the loan product and refinance offer with a particular lender, it’s important to review the following key questions:

• Does the new lender offer the features that you need and suit your financial situation? This could include:
  • Offset account
  • Redraw facility
  • Multiple offset account linking
  • Daily interest calculation for your offset account
  • Ability to split the loan
  • Early repayment options
• Is the effective rate competitive with alternative providers?
  • Here it’s important to review the rate and factor in the refinance cashback as an ongoing percentage to review whether you’ll actually be saving money by refinancing.
• Are you happy with the overall service offering from the lender?
• Are you comfortable with the size and market position of the lender?
• Do they have branches if you prefer to conduct your banking in person?
• Do the other costs associated with this lender seem reasonable and competitive?

There is much to consider when you’re working out whether it’s a good deal or not. In some instances, but not all, the refinance cashback offers are designed to distract you from the ongoing fees and charges, or uncompetitive interest rate that the lender is offering.

Let’s review the usual eligibility criteria

Typically, there are some common criteria to be eligible for a refinance cashback offer, which would usually include the following:

• Meeting a specific submission deadline for your refinance application.
• A minimum loan size is usually required, which may often by $250,000.
• There may be a settlement deadline to be eligible to receive the offer.
• There is usually a cap on the Loan to Value Ratio (LVR), which is typically 80%.
• You will usually also need to be a new customer of the lender.

We are consistently reviewing refinance cashback offers for our clients against those lenders that don’t offer them to ensure that our clients are genuinely selecting the right option based on their goals and circumstances. If you’d like to explore what refinance cashback offers are available, and what may be suitable for you, feel free to book in a complimentary discussion with a Loansuite broker.

Ally Home Loans Pty Ltd is your ally in finance for all of your home loan, investment property, business and commercial financing needs. With our wide range of lending solutions, expertise in financial planning and investment strategies, and extensive experience in working with both Australian residents and Australian expats, we are your partners for your lending needs.

Book an obligation-free, complimentary consultation here today.

Ally Home Loans Pty Ltd is an Authorised Credit Representative (Credit Representative Number – 494608) of My Local Broker (Australian Credit License – 481374). Important Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.