Are refinance cashback offers worth it?
Thinking of a fresh start for your residential loan? A refinance cashback offer might seem like a tempting incentive. But before you dive headfirst into a refinance deal, it’s important to read the fine print and make sure the benefits outweigh the risks.
While cashback offers can be a great way to offset the costs of refinancing, it’s crucial to consider the bigger picture. Lenders often offer these deals to attract new business, so work with your mortgage broker to ensure you’re getting the best deal possible.
In the following sections, we’ll explore the pros and cons of refinancing cashback offers and discuss Australia’s average monthly mortgage repayments.
Residential loan cashback offers?
When weighing up potential cashback offers and trying to find a suitable one for you, it may help to weigh up the pros and cons of each offer.
Some potential upsides of refinance cashback offer can include:
- Offsetting Costs
There are costs associated with switching residential loans, and the cash back you receive from your new provider could help cover this. - A nudge to shop around
If you’ve been with the same loan provider for a while and feel like you’re paying too much, a cashback offer can provide an incentive to switch. - Bonus cash to spend on whatever you want
If the costs associated with breaking your current loan are minimal, and you find a new provider with a loan that suits your needs, the bonus cashback can be a nice boost.
It’s essential to keep in mind some potential downsides, though. Here are some:
- Costs of breaking your current loan
Breaking out of a loan can be costly, especially if you are leaving a fixed rate loan early, and depending on your current provider, the break costs you’re charged could be more expensive than the cashback you receive. - Risk of switching to an unsuitable product
Before you accept a cashback offer, it’s worth weighing up the new loan’s interest rate and the fees associated. You may find the loan less competitive than others on the market. - Strict eligibility criteria
The eligibility criteria for refinance cashback can be rigorous, so you must work with a mortgage broker to ensure you qualify before committing to a new loan provider.
As a hypothetical example, over the life of a $600,000 principal and interest residential loan repaid over 30 years with monthly repayments, a borrower would pay $824,798 in total interest with an interest rate of 7.00%, and $695,029 with an interest rate of 6.00%. That extra percentage point may not seem significant, but over 30 years, it can mean a difference of $129,769 in interest.
The fees charged and the features that come with the loan (e.g. an offset account or being able to make extra repayments without penalty) could also play a part in determining whether a loan with a cashback offer for signing up is likely to be a good deal overall.
What is the average monthly mortgage repayment in Australia?
If you’re wondering how your mortgage stacks up, based on Australian Bureau of Statistics (ABS) lending indicators Australia’s average mortgage repayment is around $4,113 monthly. (as of Nov 2024)
This assumes an interest rate of 6.88%, based on the current average standard variable rate and a loan amount of $600,000.
If you haven’t updated your loan in a while, or if you think your repayments are creeping above average, refinancing to a cheaper rate may be one potential solution to save. Book an appointment today to explore your options and see how much you could save!
Thinking of a fresh start for your residential loan? A refinance cashback offer might seem like a tempting incentive. But before you dive headfirst into a refinance deal, it’s important to read the fine print and make sure the benefits outweigh the risks.
While cashback offers can be a great way to offset the costs of refinancing, it’s crucial to consider the bigger picture. Lenders often offer these deals to attract new business, so work with your mortgage broker to ensure you’re getting the best deal possible.
In the following sections, we’ll explore the pros and cons of refinancing cashback offers and discuss Australia’s average monthly mortgage repayments.
Residential loan cashback offers?
When weighing up potential cashback offers and trying to find a suitable one for you, it may help to weigh up the pros and cons of each offer.
Some potential upsides of refinance cashback offer can include:
- Offsetting Costs
There are costs associated with switching residential loans, and the cash back you receive from your new provider could help cover this. - A nudge to shop around
If you’ve been with the same loan provider for a while and feel like you’re paying too much, a cashback offer can provide an incentive to switch. - Bonus cash to spend on whatever you want
If the costs associated with breaking your current loan are minimal, and you find a new provider with a loan that suits your needs, the bonus cashback can be a nice boost.
It’s essential to keep in mind some potential downsides, though. Here are some:
- Costs of breaking your current loan
Breaking out of a loan can be costly, especially if you are leaving a fixed rate loan early, and depending on your current provider, the break costs you’re charged could be more expensive than the cashback you receive. - Risk of switching to an unsuitable product
Before you accept a cashback offer, it’s worth weighing up the new loan’s interest rate and the fees associated. You may find the loan less competitive than others on the market. - Strict eligibility criteria
The eligibility criteria for refinance cashback can be rigorous, so you must work with a mortgage broker to ensure you qualify before committing to a new loan provider.
As a hypothetical example, over the life of a $600,000 principal and interest residential loan repaid over 30 years with monthly repayments, a borrower would pay $824,798 in total interest with an interest rate of 7.00%, and $695,029 with an interest rate of 6.00%. That extra percentage point may not seem significant, but over 30 years, it can mean a difference of $129,769 in interest.
The fees charged and the features that come with the loan (e.g. an offset account or being able to make extra repayments without penalty) could also play a part in determining whether a loan with a cashback offer for signing up is likely to be a good deal overall.
What is the average monthly mortgage repayment in Australia?
If you’re wondering how your mortgage stacks up, based on Australian Bureau of Statistics (ABS) lending indicators Australia’s average mortgage repayment is around $4,113 monthly. (as of Nov 2024)
This assumes an interest rate of 6.88%, based on the current average standard variable rate and a loan amount of $600,000.
If you haven’t updated your loan in a while, or if you think your repayments are creeping above average, refinancing to a cheaper rate may be one potential solution to save. Book an appointment today to explore your options and see how much you could save!