A cashback mortgage is an agreement where the lender incentivises the borrower with a cash bonus or some other form of financial benefit or incentive. This is either on completion of the mortgage or at a later agreed stage. The cash back can be used to pay some of their property purchase costs such as legal and surveying costs, stamp duty, removals charges or home improvements and repairs.
About Cashback Mortgages
The amount of cashback the borrower will receive depends on the lender’s requirements. Sometimes it is calculated as a percentage of the total mortgage advance and will therefore vary in value, or it may be a fixed and non-negotiable amount. It might be a condition for some mortgage providers that stipulate the borrower should already hold or open a current account with them before they qualify for cashback.
Cashback mortgages are usually associated with standard variable rate or tracker mortgages, although the rate of interest may or may not be higher.
As well as applying an early repayment charge, if a cashback mortgage is redeemed before the end of the agreed term, the lender may ask the borrower to repay all or part of the cashback.