Cashback Mortgages
Cashback mortgage – delivers a lump sum up front to the borrower, which can be used towards the costs of purchasing and moving house: legal fees, stamp duty, removals, repairs and so on. This makes it an attractive option, in theory, especially for cash-strapped First Time Buyers, but it does tie you in for a long time and the rates are often higher than average.
The deal usually extends to borrowing up to 95% of the property value, with the cashback lump sum of around 6%. Lenders tend to arrange these mortgages as Standard Variable Rate or tracker mortgages.
Cashback mortgages - the pros and cons:
PROS:
- Up-front cash lump sum can enable purchasers with expenses.
CONS:
- Sometimes the cash is paid out on completion of the mortgage, rather than up front.
- There may well be early repayment charges if the mortgage is repaid before the end of the term.
- Rates usually higher than average.
- Terms can be long with penalties for opting out.
