Refinance Cashback Schemes – are they really worth it?

When it comes to managing our finances, finding ways to save money is always a top priority. Refinancing a mortgage or a loan can be an effective strategy to reduce monthly payments and save on interest rates. However, in recent years, financial institutions have introduced an enticing incentive to attract borrowers – cashback schemes. These schemes promise to put money back into your pocket, but the question remains: Are refinance cashback schemes really worth it? Let’s break it down:

The Pros of Refinance Cashback Schemes:

1. Immediate Financial Relief: One of the most apparent advantages of cashback schemes is the immediate financial relief they offer. Receiving a lump sum of money can be a welcome boost, helping you pay off debts, invest, or cover unexpected expenses.
2. Lower Monthly Payments: By refinancing, you have the opportunity to secure a lower interest rate, which in turn reduces your monthly payments. This can provide long-term financial stability and free up cash for other financial goals.
3. Flexibility: Cashback schemes offer borrowers flexibility in how they use the received funds. Unlike traditional refinancing, where the money is primarily used to pay off the existing loan, cashback schemes provide borrowers with the freedom to allocate the funds as needed.

The Cons of Refinance Cashback Schemes:

1. Higher Interest Rates: While the immediate cashback may seem appealing, it’s important to consider the bigger picture. Some financial institutions offset the cashback by offering slightly higher interest rates on the refinanced loan. This means you could end up paying more in interest over the long term, erasing any initial financial gains.
2. Hidden Costs: Cashback schemes can come with hidden costs, such as processing fees, closing costs, or penalties for early loan repayment. It’s crucial to carefully read the terms and conditions to understand the true cost of the refinancing.
3. Temptation to Overspend: Receiving a significant amount of money can sometimes lead to overspending or making impulsive financial decisions. It’s essential to exercise caution and have a well-thought-out plan for the cashback funds to avoid falling into a cycle of debt.

Refinance cashback schemes can be enticing, offering immediate financial relief and flexibility to borrowers. However, they don’t always come without their drawbacks. Ultimately, the worthiness of a refinance cashback scheme depends on your specific financial goals, circumstances, and the terms offered by the lender.
In many cases we’ve actually seen cashback schemes aligned with dirt cheap interest rates and competitive fee structures, but this is not always the case.

Before jumping into such a scheme, it’s crucial to thoroughly research and evaluate the terms and conditions, taking into account the potential long-term costs and hidden fees, and comparing these with other options on the market. For the average consumer, this process is like navigating a minefield with a blind fold on.

This is where we come in.

Our Mortgage advisors are experts in the fine print, and it’s our job to compare the long and short term benefits of the available products and recommend a competitive product that saves you money and aligns with your ongoing needs and objectives. In some cases, the products associated with cashback schemes can be a great solution….. and who doesn’t like free money?…. But this is not always the case.

If you’d like to know more about the cashback offers available today, or if you’d like us to complete a full analysis and comparison against other lending products in the current market, book in with one of our Mortgage Advisors today. By doing so, we can help you determine whether a refinance cashback scheme aligns with your goals and helps you achieve financial stability and growth in the long run.

Luke Meisenhelter

With over 14 years in the finance industry Luke has helped countless clients achieve their finance goals. As the Managing director and founder of Loanright Financial services Luke now manages a team of experienced mortgage brokers with a combined total of more than 60 years finance experience in residential and commercial lending as well as business and asset finance. As a leader the finance industry Luke has become an innovator in the game, mentoring and coaching other industry professionals and pushing the limits on process driven workflow structures, systems, and accountabilities, aimed at providing the best possible financial outcomes for all clients in the shortest possible time frames. Throughout his years in the finance industry, Luke has become increasingly frustrated with the quality of information available to consumers in the property and finance market, most of which is biased and designed to capture leads by creating fear and offering a magic solution. It’s Luke’s goal to share his knowledge and provide free, non-biased, quality sources of information on finance and financial concepts to as many Australians as possible.