Refinance cashback offers: Are they really worth it?

We explain the potential benefits and drawbacks when it comes to home loan refinance cashback offers.

We explain the potential benefits and drawbacks when it comes to refinance cash back offers.

If the word ‘cash back’ gets you excited, you’re certainly not alone! So it’s not surprising that refinance cash back offers can lead to many homeowners switching their home loan to a new lender in order to get their hands on a cash bonus. 

But are refinance cash back offers actually worth it? Or is this a case of something that seems too good to be true?

As with any financial decision, refinance cash back offers come with benefits and drawbacks - and the right choice for you will depend on your specific situation and overall financial goals.

What are refinance cash back offers?

A refinance cash back offer refers to a promotion offered by a lender that gives you a cash bonus when you transfer your home loan to them from your existing lender.

The cash back amount in question can vary, often ranging from a few hundred to several thousand dollars.

The appeal of refinance cash back offers

  • Quick cash: Of course, the idea of getting your hands on an immediate cash bonus can be very appealing! Cash backs can offer a welcome financial boost, especially if you’re planning some home renovations or have debts you’d like to pay off.‍
  • The chance to review your home loan: Refinancing gives you an opportunity to reassess your current home loan, so you can potentially choose a better interest rate or more favourable loan features.‍
  • Short-term financial relief: A cash back offer can help to relieve some financial pressure in the short term, easing the stress of expenses or debts.

Drawbacks to consider with refinance cash back offers

  • Higher long-term costs: One of the main things to consider is the total cost of the new loan compared to your current one. If the interest rate is higher, even slightly, it can outweigh the initial benefits of the cash bonus over the long term.‍
  • Fees and charges: In a lot of cases, refinancing involves various extra fees - such as discharge fees, application fees, valuation fees, and potentially lenders' mortgage insurance (LMI)if you have less than 20% equity in your home. These costs can quickly add up.‍
  • Loan features and terms: You’ll want to do your homework and check if the new loan has less favourable terms than your existing loan. It’s important to consider the overall impact of these factors on your finances.‍
  • “Honeymoon” rates: Some lenders might offer low introductory rates that switch to higher rates after a certain period. Make sure you know what the long-term rate will be so you don’t get caught out.

Should you be swayed by a refinance cash back offer?

If you’re thinking about a refinance cash back offer, it’s crucial to consider all the factors involved before you make a decision.

Here are some tips to help you decide whether a refinance cash back offer is a good choice:

  1. Crunch the numbers: Use a home loan calculator to compare the total cost of your current loan against the new loan, taking into account the cash back amount, interest rates, fees, and loan term.
  2. Think about your financial goals: Are you looking for lower monthly repayments, a shorter loan term, or additional loan features? Make sure the new loan aligns with these goals.
  3. Read the fine print: Take the time to understand all the terms and conditions associated with the cash back offer, including any obligations or criteria you need to meet.
  4. Ask the professionals: Chat with a financial advisor or mortgage broker who can provide personalised advice based on your financial situation.

Refinance cash back offers can certainly be tempting, but deciding whether they’re a good idea in your situation relies on doing your research and making sure the new loan aligns with your needs, budget, and long-term financial goals.

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This article is intended to provide general information only.It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000.

^ Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. This discount is applied to each loan that you have with Unloan. If you have multiple loans (e.g. one investor and one live-in loan), they will each have a discount calculated based on when you settled each loan. Unloan may withdraw this discount at any time.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.

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Calculations are not a loan approval. Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions will be set out in our loan offer, if an offer is made.

^Rates shown are inclusive of a 0.01% p.a. discount off our reference rate. On each anniversary of your loan’s settlement date, you will receive an additional discount of 0.01% per annum, up to a maximum discount of 0.30% per annum. For purchase loans with a Loan to Value Ratio (LVR) between 80.01% - 90% LVR, a lenders mortgage insurance (LMI) premium and higher interest rate apply. In some cases depending on the property’s location or type, LMI may also be required for LVR between 70.01% and 80%.

*Comparison rate is calculated on a $150,000 secured loan over a 25 year term. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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