With rising home loan interest rates banks are offering large incentives in the form of ‘Cash Back’ when you refinance or change to the bank offering the loan. If you have been tempted, consider all the long-term effects before you decide.
The RBA cash rate rose by another 0.25% at the start of February and they are predicting more rises until the Inflation rate returns to the target rate of 2% to 3%. Currently, the Inflation rate is just below 8%.
On 13 February 2023, a Google Search showed the following “Cash Back Amounts:
- St George Home Loan: $4,000
- Refinance to Westpac: $3,500
- ANZ Home Loan Switching: $4,000
For those not familiar with the term ‘Cashback Loan’, it means that if you qualify for the bank’s conditions, you will be given a cash amount paid directly to your bank account when you change your loan. This money can be spent as you wish.
For some, this may be an attractive offer. It is most likely more attractive if you can reduce your home loan by the amount of the ‘Cashback’. This assumes the bank will allow this to happen without penalty.
If you have other financial needs, cash may help you get out of a difficult financial situation. It may also help pay for any fees related to changing loans.
Before you make any financial decision, seeking advice from a professional who is qualified to give you advice is a good place to start.
You can also do the maths for yourself to see if over the length of your current loan and the new loan you will pay more in interest and loan costs. You need to consider switching costs and whether the length of the new loan will be longer.
This can be a tricky exercise for those not mathematically minded. One option is to purchase Financial Mappers. For as little as $347.00 you can create a financial plan and work out which is the best loan for you. You may also take generate their Debt Management Report which will be your strategy to manage your debts.
To find out more what this video, Manage My Debts
Glenis Phillips SF FIN – Designer of Financial Mappers
Check out these articles about Cashback Loans
- Are refinance cashback offers worth it? (Lendi)
- Are home loan cashback offers worth it? (Money Matchmaker)