Cashback Mortgages
The Basics
A lender agrees on completion of the mortgage
to provide you with a set percentage of amount
borrowed as a cash payment. Anywhere between 1%
and 12% cashback has been available. Normally
a lender will require a non-refundable booking
fee in advance to reserve this option. Borrowers
will be required to remain on the lenders variable
rate of interest for a pre-determined period of
time. This is usually linked to the amount of
cashback provided.
Advantages
Cash payment may be useful to those utilising
their savings as a deposit, to enable them to
afford fixtures and fittings for the property.
Possibility for first time buyers to use to enable
them to obtain a mortgage when they are unable
to raise a deposit other than by short term finance
arrangements.
Disadvantages
Associated redemption penalties are restrictive.
Exposure to interest rates.
Suitability
A cash back mortgage is the most suitable option
in a number of circumstances the most common being
those identified below:
- First time buyers
- Individuals utilising short-term finance arrangements
to provide their deposit
- Borrowers confident that the mortgage rate
is likely to fall
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