When thinking about remortgaging, it’s easy to get bogged down by the multitude of options that are available, yet even small financial benefits have a meaningful effect on your overall situation.
Owning a home involves more than just your monthly mortgage payments because there are various hidden or unexpected costs that quickly add up. And, if you’re looking for extra funds at the time of remortgaging as a consequence, a cashback mortgage is worth considering.
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What is a Cashback Remortgage?
A cashback remortgage is a form of mortgage refinancing where you move your loan to a different lender and, in return, receive a lump sum of cash. This payment, which is a percentage of the total loan, is offered by the new lender as an incentive to encourage you to switch.
In essence, it’s a way of providing yourself with immediate funds after remortgaging.
How Does a Cashback Remortgage Work?
A cashback remortgage works much like a standard remortgage, with the main difference being the lump sum of cash you receive. The process itself entails settling your current mortgage using funds from a new loan.
The cashback you receive can be used for lots of different purposes in that it can cover remortgaging costs, for example, such as legal fees, or be put towards personal financial goals like renovating your home.
When Will You Receive the Cashback from Your Remortgage?
The cashback will be paid directly to your solicitor along with the mortgage funds on the day you receive the keys to your new property, or otherwise after you’ve made your first mortgage payment.
It’s important to discuss with your solicitor how you’d prefer to receive the cashback, since some lenders offer the option to apply the cashback to your monthly payments rather than receiving it as a lump sum.
Eligibility Criteria for Cashback Remortgages
Your eligibility for a cashback remortgage depends on a range of personal factors including your financial situation and credit history, as it does with any mortgage product.
There are also distinct criteria you’ll need to meet. For instance, many lenders want you to have an active banking relationship with them or to be a first-time buyer. There could be a minimum loan amount required alongside this too, or other conditions specific to the lender’s policies which will determine whether you qualify.
Are Interest Rates Higher for Cashback Remortgages?
The central consideration with cashback remortgages is that they have higher interest rates attached to them when compared to standard remortgages without added incentives, such as fixed-rate options.
This higher rate is slightly balanced by the cash benefit, making them more appealing in the short term. However, you really need to weigh the long-term costs, given that without comparing different products, you could end up with a larger financial outlay owing to higher monthly payments.
Advantages of Cashback Remortgages
The benefits of cashback remortgages are that:
- You’ll receive a lump sum of cash
- You can use this lump sum to reduce the financial burden of home improvements, or other personal expenses
- Some cashback remortgages give you additional perks, such as covering legal fees
Disadvantages of Cashback Remortgages
Unfortunately, there are some downsides to getting a cashback remortgage, i.e.:
- Cashback remortgages do come with higher interest rates
- The fees mentioned may not be competitive, as opposed to those associated with other remortgage options
- Certain cashback remortgages have stricter conditions on making overpayments or repaying early
Should You Get a Cashback Remortgage?
Deciding whether a cashback remortgage is the best option comes down to how you weigh the immediate benefit of a lump sum against the potential long-term costs due to higher interest rates. For some, those extra funds after remortgaging represent the ideal solution to their financial needs.
To make an informed decision, it’s essential to evaluate all available options and, if necessary, seek expert advice. Our user-friendly online platform makes comparing remortgage deals across the UK simple. With daily updates, it gives you access to a wide range of competitive offers, ensuring you’re always aware of the best rates.
Once you’ve found a deal that suits you, our team of professionals is here to provide personalised support. We take the time to understand your financial situation and goals, helping you choose the most appropriate option.
If you’re uncertain or have questions, don’t hesitate to reach out. We’re here to make the process straightforward, remove any confusion, and assist you in securing a mortgage deal which fits your financial future.
Cashback is only offered if you choose a remortgage deal that includes it. With a cashback remortgage, your lender gives you a one-off payment once the new mortgage is in place.
Cashback remortgages are tempting if you’d like a bit of extra money, however, they do come with higher interest rates than standard remortgages. And, that increased rate applies to the whole mortgage balance, not just the portion paid to you as cashback.
Cashback remortgages only provide a single lump sum when the mortgage begins, so they don’t give ongoing or monthly cashback on your regular repayments.
No, lenders issue a single cashback payment for each remortgage application, regardless of how many applicants are on it.
About the Author:
Matt is a top contributor at Speedy Remortgage and has worked in the financial services industry for over a decade now. Through his expertise on mortgage and remortgage has helped hundreds of customers to achieve their property goals.