The cashback mortgage has been around for quite a while now – and it’s showing no sign of going away!
Your decision as to whether you want a cashback mortgage or non-cashback will really refine your options in terms of mortgage lenders. There are lenders who offer a full cashback incentive as part of their offering, but their interest rate offering will be less competitive than those not offering cashback.
Cashback Mortgage
You can receive as much as 3% cashback with some lenders. This equates to €9,000 in total on a €300,000 mortgage. Generally, you will receive 2% shortly after you draw your mortgage down and a further 1% after completing 5 years with that lender. This can be very important to you if you are parting with all your savings to complete the purchase.
It’s not a gimmick, as long as you are aware of the following:
- You will have higher monthly repayments
- At the end of any given period of time, you will owe more on your mortgage with a cashback lender than a non-cashback lender
- You are more likely to want to switch your mortgage than if you had opted to go with a lower interest rate provider from the outset
- You will pay more in interest over the life of your mortgage
Non-Cashback Mortgage
This may be the choice for you, if you still have sufficient savings left after completing the purchase of the house. If a client has good savings in reserve, we would typically challenge them to really consider if they need cashback . It may be more prudent to opt for a lender offering the lowest available interest rate because:
- You will pay less interest back to your lender over the term of your mortgage
- Your monthly repayments will be lower
- There is a lower chance that you will want to switch your mortgage to another provider at a later stage
- You may still avail of a small cashback element, typically €1,500
There is a place for both options in the market, and both can be good decisions depending on your circumstances. The best advice is to speak with a Mortgage Broker who will be able to give you a good steer. A mortgage broker will ensure you choose the option most suitable to you.
For the full set of tips on making yourself mortgage ready, download our Top Tips for First Time Buyers guide – 17 pages of knowledge from years of helping people get the mortgage they want.