Cashback Mortgages Explained

It might sound too good to be true; a lender pays you cash to take out a mortgage with them. But that’s exactly how cashback mortgages work. However, besides this attractive upside, it’s also important to understand all the other features of this type of finance.

In this article, we’ll explain how cashback mortgages work, where you can get one, what you should consider before applying, and where to find the right advice.

What is a cashback mortgage?

With a cashback mortgage, the lender will pay you a lump sum simply for taking one out. This is usually between £200 and £1,000 or sometimes a percentage of the total amount you’re borrowing. You’ll get this cash when your application is approved or after your first repayment.

Cashback mortgages are designed with first-time buyers in mind. Buying your first home is a very expensive time, and a cash lump sum can help you cover some of the costs involved, such as buying furniture.

These mortgages usually have an introductory period of between two and five years. During this time, you probably won’t be able to make overpayments or may have to pay a fee if you want to do so.

If you want to move or remortgage during the introductory period, you may have to repay some or all of the upfront cash back and might also need to pay an exit fee. So, to avoid paying more than you received in cash, you should choose your mortgage carefully with the help of an experienced broker to guide you towards the right lender.

Which lenders offer cashback mortgages?

Most mainstream lenders offer cashback mortgages.

Here are a few examples of what’s currently* on offer from the high street:

Natwest

The NatWest cashback mortgage offers first-time buyers between £150 and £1,000 (decided on a case-by-case basis). You’ll receive your payment on the day your mortgage begins.

Nationwide

The Nationwide cashback mortgage offers £500 to first-time buyers. You’ll receive the cash within a month of completing your home purchase.

Santander

Santander does not currently offer a cashback mortgage. Previously, they offered cashback between £250 and £1,000, and these offers may return in the future.

RBS

The RBS cashback mortgage offers first-time buyers between £150 and £1,000 (decided on a case-by-case basis). You’ll receive the cash on the day your mortgage begins.

Lloyds

The Lloyds cashback mortgage offers £250 to current account customers. You must have a Club Lloyds account to be eligible. You’ll receive the payment once your purchase is completed.

* = All of the above offers may be subject to change at the lender’s discretion at any time.

How a broker can help you secure cashback from your mortgage

There’s a lot to think about before you apply for your cashback mortgage, so seeking guidance from someone with experience in this specific lending area can be a shrewd move. A cashback mortgage specialist can help with:

Finding deals

A broker can quickly compare all the cashback mortgage deals currently on the market, whereas this would be a very time-consuming task to do yourself – and you wouldn’t necessarily find all of them.

Calculating costs

They can also easily calculate the long-term costs of the different mortgages available, so you can see whether it’s truly worth it to receive the cash upfront or not. You want to avoid paying much higher monthly repayments for years in exchange for a small cash payment now.

Offering advice

By seeking impartial advice from an expert, you can be sure that you end up with the right mortgage. If taking out a cashback mortgage isn’t in your best interests, with more suitable options available, rest assured—they will tell you.

If you get in touch, we’ll arrange for a broker with experience in these types of mortgages to contact you immediately for a no-obligation chat.

Benefits of a cashback mortgage

The obvious advantage of a cashback mortgage is that you’ll receive a lump sum of up to £1,000. Your lender may also pay some of the costs of buying a home, such as survey fees or stamp duty.

However, there are also some drawbacks that you should carefully consider:

• Cashback mortgages often have higher rates than other mortgages
• There may be additional fees involved in the long term, which could cost you more than the cash you receive
• It can be expensive to exit a cashback mortgage, which might prevent you from moving house or refinancing

Cashback when remortgaging

You don’t necessarily have to move to a new home to get a cashback mortgage; you can also get one by refinancing your current one. However, the same guidance applies: You should carefully consider whether it’s worth it in the long term.

Get matched with a broker who understands special mortgage features

If you have any questions about cashback mortgages or are unsure whether this product is right for you, it’s best to speak to an expert. We work with a number of brokers who specialise in cashback mortgages and would be happy to help.

If you’d like us to connect you with someone for a no-obligation chat, simply use our broker-matching service. To get started, just call 0330 818 7026 or make an enquiry.