Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 16th April 2019* | Published: 5th April 2019
Can I get a mortgage cash back?
We get lots of enquiries from customers about cashback mortgages. You may be wondering what a cashback mortgage is and whether it is right for you, or perhaps you’re looking for a cashback mortgage and aren’t sure where to go.
It can be particularly frustrating trying to find a lender if you have a low income, have recently started a new job or have bad credit as high street banks and mainstream lenders tend to view applicants with these things as higher risk. The good news is that there may well be options available.
We have collated all the key information you need to know here in this guide:
Cashback mortgages give you a cash incentive for taking out a mortgage. There are many different cashback mortgages and each one will have different rules and conditions about how much you get and when you receive the cashback. For example, some lenders will give you the cash upfront whereas others won’t release the cashback until you start making your monthly mortgage repayments.
How does a cash back mortgage work?
When you apply for a cashback mortgage, the lender will tell you how much cashback you can expect to receive once you have completed on your mortgage. They will also explain any conditions of your mortgage, including if there are any early repayment fees or charges.
Once your application is approved you will receive the cashback either as a lump sum into your account or it will be sent directly to your solicitor to cover any legal fees.
What are the pros and cons of a cashback mortgage?
Like any financial product, cashback mortgages have benefits and potential drawbacks and it’s important to be aware of both before applying for one.
Some cashback mortgage lenders offer discounts or will even cover the costs of removal fees and other costs that can come up when moving
There can be early repayment penalties
The cashback can help you cover some of the costs of moving or pay for other costs involved when setting up a new home
If you are in your introductory period, which can last between two-five years, you may have tighter restrictions on your mortgage overpayments
Some lenders will cover legal fees for applicants who are remortgaging
If you decide to remortgage, your lender may charge you which could also eat into your cashback.
If any of the potential pitfalls listed above concern you, don’t panic! There’s a chance all, or at least some of them won’t even apply to you, and if you make an enquiry, the advisors we work with know how to minimise the level of risk.
How much cash can you get back on a Cashback Mortgage?
In general, cashback mortgages in the UK offer between £200 and £1,000 but every lender is different. Some lenders offer a fixed rate whereas others use a percentage of your mortgage to calculate your figure.
As well as this, the amount of cashback as well as other incentives you receive can vary depending on if you are:
A first time buyer
An existing mortgage member
When your cashback will be paid
We’re often asked, “Will I only receive my funds on completion with a cashback mortgage?”This can vary from lender to lender as they all have different terms and conditions. For instance, one may agree to pay the cashback on completion of the mortgage whilst another may require you to have made your first mortgage payment before any cashback funds are released.
How can you find the best cashback mortgage offers?
To find the most competitive cashback mortgage offers in the UK, it’s best to speak to an expert. Comparing mortgages can be time consuming and a cashback mortgage broker can dedicate their time to finding you the best option for you.
Should I use a broker to get a cashback mortgage?
A cashback mortgage broker is a professional who compares all the mortgage deals with cashback that are available to you based on your circumstances, offers bespoke advice on this form of lending and connects you to the right lender.
Using information provided by you, such as your income, age, job and whether you’re a first time buyer or are remortgaging, they calculate which ones will be most beneficial for you. A good mortgage broker will look at:
Interest rate - they’ll compare the interest rate of mortgages against other deals and calculate how much you could save by going with a different lender
Introductory offers - how long they last and the rate you’ll have to pay after
Early repayment fees - if you decide to pay your mortgage early or pay more monthly, how much will the lender charge you?
Cashback amount - some lenders offer a set lump sum with their cashback offers on their mortgages whilst others offer a percentage of your cashback mortgage, i.e. 5%
Cashback mortgage rates and fees
A cashback mortgage broker will also look at other mortgage products and compare them to mortgages with cashback. Some lenders offer fixed rate cashback mortgages with interest rates that do not increase for a set period of time, e.g 5 years, whereas other lenders have interest rates that are variable and can change over time. A mortgage broker will look into this and work out which mortgage will save you the most money.
They’ll also look at the cost of the interest over time versus the amount of cashback you can receive. If the overall cost of the mortgage works out to be more than the cashback sum, then the cashback deal isn’t better value for money.
Example of a fixed rate mortgage with cashback
Some cashback mortgages might offer £1,000 cashback, which can be appealing however, the terms of that mortgage might stipulate that you pay more interest over the term. This could mean that overall you spend more money.
Fixed rate of interest
Monthly mortgage payments
Using the figures above, we can work out whether over time a homeowner would pay more over time if they chose the mortgage deal with the highest amount of cashback.
£897 x 12 (calendar months) = £10,764
£10,764 x 25 (mortgage term in years) = £269,100
A Mortgage D
£867 x 12 (calendar months) = £10,404
£10,404 x 25 (mortgage term in years) = £260,100
The importance of comparing cashback mortgage deals
If we look at the above example, we can see that taking out a mortgage with the highest cashback amount, would cost the homeowner an additional £9,000 over the 25 year period of their mortgage. Of course, the figures above are purely hypothetical and are for a fixed rate deal. However, they do show the importance of comparing cashback offers and the interest rate that comes with them.
Alternatively, some homeowners are happy to pay higher cashback mortgage rates over the term of their mortgage as the upfront cashback sum can help them cover initial moving costs.
Most homeowners obviously want to find the best possible mortgage deal overall. This is why advice from a mortgage broker is so important as they can calculate the best cashback mortgage rates as well as the mortgage with the lowest monthly payments overall.
First time buyer cashback mortgages
For many first time buyers, cashback can be really useful in helping with moving costs or legal fees. There are many lenders who offer mortgages with cashback for first time buyers but remember that if you are applying for a joint mortgage, most lenders will state that you both need to be first time buyers to receive the cashback.
Additionally, with the majority of lenders, the cashback is paid out per mortgage and not per applicant.
What is the loan to value ratio for first-time buyer cashback mortgages?
Most lenders that offer cashback mortgages to first time buyers will offer a loan to value of 85%, some will offer a 90% and a handful will consider a 95% LTV in the right circumstances. The amount of money that you can borrow on a ftb cashback mortgage may vary depending on your income, the property type you are buying, your job and many other affordability factors.
How much deposit do you need for a cashback mortgage?
There are lenders that will consider 100% mortgages with no deposit, however several cashback mortgage lenders will require a deposit from the buyer in certain circumstances.
Lenders that require a deposit may request a maximum Loan to Value (LTV) of 90-95%, meaning that they will lend 90-95% of the property value if you can pay a 5-10% deposit. This will vary depending on the lender, your affordability, your credit score and many other factors.
A lender that specialises in a particular type of mortgage i.e. mortgages for people with bad credit or non-standard builds may ask for a higher deposit of 15-25%.
Could you get a cashback mortgage?
In the right circumstances, potentially yes. It really depends on who is offering the mortgage as to whether you’d qualify with them or not at the time. Most lenders have their own criteria (which can change from time to time) which they use to assess whether or not someone is eligible for a mortgage and if they are, how much they can loan them and under what terms.
It is only once a lender has decided whether or not you meet their affordability criteria that they can approve or decline your application and decide on whether you can receive cashback.
Your credit history
Type of property
This doesn’t mean that you won’t be able toport your mortgage and borrow more though. One of the expert mortgage brokers we work with can find you a range of mortgages from lenders who will accept factors like bad credit, change of job or a lower income.
Bad credit and cashback mortgages
Customers with bad credit can often be seen as a higher risk to lenders and so there can be fewer lenders who are willing to offer cashback mortgages to them. However that’s not to say that cashback mortgages for people with bad credit don’t exist as they do pop up occasionally. You can read more about bad credit mortgages here.
How much can you borrow on a Cashback mortgage?
In general, most cashback mortgage lenders will cap loans to a multiple of your earnings. For example, most will cap earnings at 4.5x your annual income (so someone earning £20k would not be able to borrow more than £80k.) However, some lenders can offer up to 5x your income, and a handful even up to 6x your income in the right circumstances.
What also plays a part is the type of income you earn, and the amount of other financial commitments you have. The more variable / less reliable the income, the fewer the lenders, and the more debt you have, the less a lender will be prepared to offer you.
How does your income affect your cashback mortgage?
Cashback mortgage lenders will want to know if your income is a set basic wage or salary or whether your income varies. As well as how much you earn in salaries / wages, they will also look at your:
Every lender has different rules about what they accept as income. Some will consider 100% of all of the above whilst others will only consider 80%, some 50% and some won’t accept them at all.
If you’re retired or near retirement age and are looking for a cashback mortgage lender, it could be harder as there are fewer lenders who will consider older applicants.
Some lenders have upper age limits and won’t lend to borrowers over 75, whilst with others the maximum age is 85, and a small minority of lenders have no age limit as long as they’re confident you will be able to continue paying off the mortgage.
Buy to Let mortgage
Most Buy to Let lenders will offer a Loan to Value (LTV) of 75%, meaning that you’ll need a 25% deposit, however some will consider just 20% and a handful a 15% deposit in the right circumstances. Again, this can differ and some lenders will require a larger deposit depending on a number of factors.
Cashback mortgages for second homes
If you want to apply for a cashback mortgage for a second property, you may find that some lenders have stricter criteria as they will want to be certain that you can afford your second property’s mortgage as well as your primary residence, and any other expenses you have. If you have adverse credit or have a lower income and want to apply for a cashback mortgage for a second home, your choice of lenders may be restricted, so speak to a specialist advisor about this.
How do I find the best cashback mortgage offers and deals?
Finding the best cashback mortgage deals can be difficult if you’re doing the legwork yourself. If you approach a lender directly, you will only have access to their products and making multiple enquiries could negatively affect your credit file.
Online rates tables aren’t ideal either, since many of them give prominent placement to sponsored mortgage cashback offers and aren’t tailored to your needs.
To avoid potential marks on your credit report and ensure you get the right advice the first time around, make an enquiry to speak with one of the expert brokers we work with. Since they have access to the entire market, you can rest assured that all of the best cashback mortgages you qualify for will be within reach.
How do I get the best cashback mortgage rates?
Mortgage lenders usually decide which interest rate to offer based on the level of risk involved in the deal, and they will determine this based on these factors…
Your credit rating: Depending on the age and severity of the credit issue, some lenders will offer higher interest rates and others will turn you away outright. That said, the advisors we work with have access to specialist bad credit lenders who offer favourable deals to bad credit customers.
The amount of deposit you have: Putting down more than the minimum deposit amount (usually 5-10% for a residential property) can minimise the level of risk. Read more about mortgage deposits in our guide here.
How you make your money: Specialist advice may be required to get the best rates if you’re self-employed or make a sizeable portion of your income through bonuses, commission or regular overtime.
The best rates might be harder to come by if you’re retired or the mortgage term will run into your retirement years. The advisors we work with have access to specialist lenders who offer mortgages for pensioners.
The property type: Specialist advice might be needed to get the best rates if the home you’re buying has elements of non-standard construction.
To ensure that you end up with the best mortgage cashback deal in the UK, you will also need access to the entire market, which the advisors we work with can provide. Make an enquiry to speak with one of them over the phone today!
Cashback mortgage FAQs
Can you refinance your mortgage and get cash back?
Yes, in the right circumstances, this could be possible. There are lenders who offer cashback incentives to customers who want to remortgage their current property by switching banks. Some high street lenders are offering up to £1,000 to homeowners if they switch their current mortgage to a cashback refinance mortgage with them.
Can you get cashback if you move house?
Some lenders are also offering cashback to customers who are moving house and therefore need to apply for a new mortgage. However, lenders can exclude certain mortgage types such as Buy to Let and there may also be a minimum loan amount that you have to apply for in order to qualify for their cashback mortgage.
Can you get cashback on your monthly mortgage payments?
There are lenders who pay cashback each month to their customers based on a percentage of their customer’s monthly mortgage payment. As well as cashback on mortgage payments some lenders offer cashback on household bills including gas, water, phone bills and council tax.
Example of monthly cashback:
Interest as a percentage
Interest earned in GBP
Banks and other lenders can charge monthly fees for their accounts so before deciding to switch your mortgage or current account because of a monthly cashback incentive It’s best to work out how much you may be charged for having the account versus how much cashback you’ll receive. A mortgage advisor can help you work this out and find the best cashback mortgage for you. Contact them here for this.
Cashback Mortgage calculator
Because there are so many variables that can affect a Cashback Mortgage application such as adverse credit, employment circumstances or property type, a calculator for a mortgage with cashback can only give a rough guide.
To get more detailed and professional advice for your situation, speak to an expert. The advisors we work with can take you through the various options to give you a guide on how much you could borrow with each different lender.
Why you should speak to a Cashback Mortgage broker
Although some lenders might offer cashback, whether you’re eligible to get a mortgage with them is not always certain. For example, Nationwide won’t lend to a self-employed applicant unless they have two years full trading history. Barclays have previously rejected customers for a cashback mortgage if they have severe bad credit such as defaults, bankruptcy IVA’s.
A Santander cashback mortgage can sometimes be difficult because they can be cautious about lending on non-standard properties, especially if they are built from timber.
Furthermore, a Nationwide cashback mortgage has an age limit of 85 whereas a Virgin cashback mortgage has an age limit of 75.
Because of the varying criteria with each cashback mortgage lender, it's important that your cashback mortgage broker specialises in cashback mortgages, as well as various other areas, such as:
Income from various sources (bonus/overtime/allowances etc)
Non-standard construction property
Maximising income and affordability
Speak to a cashback mortgage expert
If you like anything in this article or you’d like to know more, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.
Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.
*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA.Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes.
The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete's presence in the industry as the 'go-to' for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
Read more about Pete here...