What is a cashback mortgage?
Cashback mortgages pay a cash lump sum if your property purchase is successful. Compare the interest rates and fees of every mortgage offering cashback to find the most competitive deals.
You can get cashback on a range of items thanks to the many cashback sites out there like TopCashback and Quidco. But did you know you can get some cashback on your mortgage? In this guide we explore what a cashback mortgage is, how mortgage cashback works and what it means for you.
What does cashback mean on a mortgage?
A cashback mortgage gives you a nice bonus when the purchase of your new home is successful. It’s basically an incentive from mortgage providers to entice you to take your mortgage out with them. Cashback can range from a few hundred to thousands of pounds and is usually paid when the mortgage starts – or a few months in.
How does mortgage cashback work?
Firstly, you need to meet certain conditions to be accepted for a cashback mortgage. For example, some lenders may require that you already have a current account with them.
If you meet the criteria, you should be able to progress like any other mortgage application. Your mortgage advisor can take you through the different conditions.
Avoid planning to do anything with the money straightaway – as you may need to be a few months into the mortgage term before you receive it. So, while you may want it for home improvements or to cover the costs of stamp duty, it may not be in your bank immediately.
Pros and cons of a cashback mortgage
Pro: Cash lump sum
The biggest advantage of a cashback mortgage is receiving a cash lump sum. For example, if you’ve paid to have new carpets fitted, getting this cashback may help cover those costs as a little bonus. If you’ve moved into a new-build or recently renovated home, you might not need to make any changes and so can add this cash to your savings.
Con: Higher interest rates
While you get a cash lump sum with a cashback mortgage, it doesn’t mean the mortgage has the best rate. If you end up with a higher interest rate, you could pay more than the cashback you receive in just interest – meaning you haven’t gained anything.
However, this might not always be the case, and cashback could be the best option. Speak to your mortgage advisor for help working out which option is most financially beneficial.
What is a cashback mortgage: FAQs
Can anyone get a cashback mortgage?
Yes, anyone can apply for a cashback mortgage – but that doesn’t mean you’ll be accepted. Check the lender’s criteria before applying (the same as for any mortgage), to avoid being rejected, which can negatively impact your credit score and hinder future applications.
Lenders consider a range of factors to decide on whether to approve a cashback mortgage, such as your:
- Household income
- Credit scores and ratings
- Property you want to buy
Can I get a cashback mortgage with a bad credit score?
Having low or bad credit doesn’t stop you from getting a mortgage. There are lenders specialising in helping people with poor credit scores get on the property ladder.
However, cashback mortgages don’t always have the best rates. Having a low credit score puts you at risk of getting a mortgage with a high interest rate already. It’s recommended you speak to a mortgage advisor to find the best option for your needs.
Is mortgage cashback taxable?
As long as the cashback is paid in one lump sum and it doesn’t affect the price of the property, the cashback is not taxable. For example, if the property costs £100,000 and you receive £250 cashback, the property price is still £100,000 – the purchase price has not reduced because you received cashback.
When do I receive the cashback?
It’s usually paid to your solicitor along with the loan amount on the day of completion. However, timings can vary depending on the lender’s terms and conditions.
Mortgages change regularly and there are a range of offers, deals and discounts that vary based on where in the country you buy a property. Offers also change depending on whether you hold a current account with the lender, if you’re a first-time buyer and how long the fixed term is.
At the time of writing, these are some of the best cashback deals available.
- Maximum LTV 75%
- Maximum cashback £250
- Maximum LTV 60%
- Maximum cashback £250
- Maximum LTV 60%
- Maximum cashback £750
- AIB (NI) 5-year fixed cashback mortgage for properties in Northern Ireland
- Maximum LTV 85%
- Maximum cashback £1,500
- Skipton 5-year fixed cashback mortgage
- Maximum LTV 95%
- Maximum cashback 1,000
Mortgages aren’t the only things you can get cashback on. Check out our other cashback blogs for more tips and advice on saving money.