Cashback mortgages involve the mortgage provider paying a lump sum to you the borrower at the completion of your mortgage term, either as a set amount or as a percentage of the amount paid.
What Is A cash Back Mortgage
The term Cash Back mortgage really describes a minor feature of the mortgage rather than the total mortgage itself. They can be attractive looking offers but they do not make up the bulk of the financial arrangement that will run for many years.
A Cash Back arrangement for a mortgage will usually have no effect on the basic structure of the mortgage being offered and will not make a difference to the interest rate repayment in the way that a Capped Rate or Fixed Rate mortgage does. In Capped and Fixed the way in which the interest repayments are structured and calculated are what defines the mortgage and the subsequent monthly payments. The Cash Back is a separate cash incentive and the borrower will still need to choose which of the various types of mortgage to arrange.
Different Cash Back Mortgage Types
Some lenders only offer Cash Back on their own standard Variable Rate mortgage as a way of promoting that style of mortgage but Cash Back deals can be found on other types of mortgage such as Capped and Fixed Rate. The borrower may well choose a Capped Rate mortgage at an agreed rate for a fixed time period that also offers a cash back feature on completion.
The Cash Back offer is applicable at the beginning of the time period of the mortgage and thatís the time when it provides its benefits. It has no pay off later in the mortgage but may on the other-hand have negative financial significance in terms of tie-ins, repayment penalties and other clauses that make it possible for the lender to offer it in the first place.
Long term planning of the actual mortgage repayments will not be influenced by the Cash Back offer but planning that takes into account early redemption or changes to the mortgage product type in later years may well be restricted by the arrangement.