Cashback Offers When Refinancing: What They Are and What to Watch For
If you've looked into refinancing your mortgage, you've probably come across the term cashback. It's a lump sum, paid to you, simply for bringing your lending to a new lender. It sounds almost too straightforward to be real, so let's break down what it actually is, and what to check before you count on it.
Why Banks Offer It:
Banks in New Zealand compete heavily for new customers, and a cash incentive is often a more attractive hook than shaving a small amount off an interest rate that most people won't notice month to month. Cashback is paid to you directly on settlement when you refinance your mortgage to a new bank.
What to Know Before You Count On It:
You'll usually need at least 20% equity. Most cashback offers require an LVR of 80% or lower, meaning your loan needs to sit at 80% or less of your property's value. If you're above that, it's still worth asking, but don't assume it'll be on the table.
The amount varies, and it changes over time. It's often calculated as a rough percentage of your lending, but that percentage isn't fixed. It moves with the market and differs from bank to bank.
Watch for clawback clauses. Most lenders will ask for some or all of the cashback repaid if you switch away again within a set period, often a few years. It's worth reading that part of the fine print carefully before you sign, not after.
It's one factor, not the whole decision. A great cashback offer attached to a mediocre interest rate can end up costing you more over the life of the loan than a smaller cashback with a sharper rate. The two need to be weighed together, not treated as separate wins.
A Real Example:
Take a couple with a $750,000 mortgage who refinanced to a new lender as part of a broader restructure. As part of the deal, the new lender offered a 0.9% cashback based on the total loan amount.
In this case, 0.9% of $750,000 worked out to $6,750, paid to them once the loan settled. That's a genuinely useful sum, but it was one part of a bigger picture that also included restructuring their mortgage to better suit their goals, not the reason for the refinance on its own.
Get a Rough Estimate:
As a general guide, cashback is often somewhere around 0.9% of your lending, though this varies by lender and situation. This is something which I can help you review to see if refinancing and getting a cashback is beneficial, alongside getting a good deal.
Cashback can be a genuinely useful part of a refinance, but it's rarely the whole story. If you're considering a switch, get in touch and we'll look at the full picture together, rate, cashback, fees, and clawback terms, so you're making the decision based on what actually saves you the most, not just the number that looks biggest upfront.
