A cash back mortgage is usually promoted to first time buyers as a way of offering setup funds, which they may use to help them with their new home. This is usually a cash sum incentive at the start of the mortgage once all applications have been finalised and the final setup is completed. Purchasing a home can be expensive, so this initial cash injection, which is usually used on practical elements such as furniture or decorating, can be a great help for people. However, it can be used for any purpose.
A ‘cashback mortgage’ offers you a lump sum as a percentage of your loan in cash when the process of signing the contract is complete. Individuals choose these mortgages when they need some extra money that they can access to perhaps help with removal expenses. The cash may also be used to pay off other high interest rate loans like credit cards. Some lenders will offer these mortgages as an incentive to take out a loan with them so beware; remember that you never get something for nothing. You may well find, if you do the sums, that this is quite an expensive way to borrow the money. With a ‘cashback mortgage’ you must decide how much cash you can reasonably afford to take out in the loan. To figure out this amount you will need to speak to a lender or use a mortgage calculator.
An online mortgage calculator will tell you the amount of your monthly repayment based on the interest rate, term of the loan, and the amount of the loan. The first thing you should do is to enter the amount of the loan you would like to have. This will help you decide if you can afford the amount of cash you would like to get back at the end of the contractual process. The ‘cashback mortgage’ usually offers a comparatively small amount of cash
It may be though that the mortgage lender will instead offer money towards the cost of legal fees or a property survey. This may be a set specified amount or a certain percentage of the mortgage.
As they say ‘you get nothing for free’ and this is the case with a cash back mortgage. As soon as the sum of money is accepted by the borrower, they are they tied in with the lender for a certain, set period. This ‘tie in’ means that should you wish to change your mortgage lender for some reason, the money that you received initially, will have to be paid back. It is otherwise known as an ‘early repayment charge’. Alternatively, it may mean that you may have to pay the lenders standard variable rate for a certain period of time before you can change lenders.
Even with the ‘tie in’, cash back mortgage are a popular choice for borrowers. After using a mortgage calculator you can approach a lending company with some idea of the loan you need and just what your limits are going to be. You can also change the variables of the loans based on the cash back amount, length of time you have the loan, and the current interest rate.
