Guide to Refinance Cashback Offers and Refinancing in 2023
With more and more people finding it challenging to meet the financial demands of the times, refinancing has become a go-to solution for many. There are a few different refinancing options a homeowner can tap into when the need arises. After a rapid-fire of interest rate increases this year, we’ve now seen a resurgence in refinance cashback offers from many lenders. But what’s the deal with a cashback offer and are they worth it? Read on to find out more about cashback refinance offers and how a professional mortgage broker can help you navigate refinancing.
Let’s first explain that a “cash-out refinance” is not the same as a cashback offer on a refinance deal. A cash-out refinance is a process that allows homeowners to tap into their property’s equity and receive an amount of cash when they draw down on that equity. This strategy is ideal for those looking to fund significant expenses, from home renovations to consolidating other high-interest debts.
However, it’s crucial to consider the implications. While accessing equity can be beneficial, it might lead to higher loan amounts, potentially longer repayment terms, and an impact on monthly commitments.
On the other hand, a refinance cashback offer is a promotional tool used by lenders looking to acquire new customers. It comes packaged as a rebate or incentive after the refinancing process concludes. It can definitely be an attractive proposition, especially when looking to offset some associated costs.
These cashback refinance offers can vary – from rebates covering settlement costs to promotional offers for newcomers or loyalty bonuses for long standing clients. Here are a few of the usual offers a homeowner might encounter when they’re presented with a cashback refinance option:
- Flat Cashback Amount – A predetermined lump sum offered to the homeowner upon successful completion of the refinancing process.
- Waived Fees – In addition to or instead of cashback, some lenders might waive certain fees, such as application fees, valuation fees, or annual fees, for a specified period.
- Loyalty Bonuses – For homeowners who choose to refinance with their current lender, there might be special cashback offers or bonuses as a reward for their loyalty.
The most common we see are lenders competing with one another for new business and offering a predetermined lump sum for completing a refinance settlement.
Pros and Cons of a Cashback Refinance Offer
Just like all types of home loans and refinancing options, a refinance cashback offer also has its own set of pros and cons. Here are some of them:
- Immediate Financial Relief – The cashback received can be used to cover immediate expenses or to reinvest.
- Incentives from Lenders – Lenders often provide cashback offers as an incentive to attract borrowers, which can mean competitive terms.
- Offset Refinancing Costs – The cashback can be used to offset some of the costs associated with refinancing, such as closing costs or application fees.
- Flexibility – The cashback received isn’t restricted to a specific use. Homeowners can use it as they see fit, whether it’s for home improvements, debt repayment, or other needs.
- Potentially Higher Interest Rates – Some lenders might offer cashback refinance deals with slightly higher interest rates to compensate for the upfront cash given.
- Long-Term Cost – While the immediate cashback is beneficial, it’s essential to consider the long-term implications, especially if the refinancing comes with less favourable terms.
- Potential for More Debt – If not managed properly, homeowners might end up in more debt, especially if they don’t use the cashback to offset other debts or if they don’t account for potential changes in their financial situation.
It’s crucial for homeowners to weigh these pros and cons carefully and consult with an expert mortgage broker to make an informed decision about cashback refinancing offers if they are looking to refinance their home loan.
Refinancing and How Professional Lending Solutions Can Help You
Refinancing is a powerful tool, offering homeowners the flexibility to adapt to changing financial circumstances or leverage opportunities. Engaging with mortgage brokers like Phil and his team can offer insights tailored to your situation, ensuring you make a decision that aligns with your financial goals.
We can do a FREE home loan health check for you to understand your current loan, what is available on the market for refinancing and whether any available refinance cashback offers are worth the switch for you.