Home ownership comes with significant upfront costs like legal fees, deposits, mortgage arrangement fees etc. Then you must factor in the other costs of moving, such as hiring removal vans, installing broadband and buying furniture.
For cash-strapped homebuyers, the incentive of a lump sum of money at the start of a mortgage term can be a very attractive prospect.
Read on to find out how Cashback Mortgages work.
A cashback mortgage is like any other mortgage, only you may be offered cash as a percentage of every £100,000 you draw down. Typically, this could be around 2% (so, £2,000 cash), or a set figure (say, £500). The funds will be transferred over, once you have completed your home purchase.
But please note, the lender reserves the right to claw back some or all of the cash offered, if you choose to redeem your mortgage before the agreed term ends.
Cashback can be offered with any type of mortgage, whether it is fixed, capped or tracking the Bank of England base rate, for a certain period of time. For this reason, it is better thought of as a mortgage ‘feature’ rather than a mortgage type.
Cashback mortgages are becoming widely available, as the money offered to home buyers at this most crucial time can make the process of buying a home a lot more affordable.
Glen and Bella are buying their first home. They have been saving diligently for two years and even moved into Glen’s parents’ house, to lower their living costs as much as possible.
In this time, they were able to raise a 10% deposit on a home, which was pretty tough going for both of them. They have very little to furnish their new home with and are worried about covering the moving costs with what little money they have.
Glen spotted a mortgage which offered £1000 cash back for first-time buyers and a rate of 5%. For those with 15% deposit, the interest rate goes down to 4%, with cashback of £1000. Glen and Bella consider holding off on the deal until they reach 15% deposit saved. Glen’s parents, on the other hand, want to sell their house and downsize. The couple doesn’t have the luxury of time to wait and save. Bella compared some fixed-rate deals with no cashback incentive and found that although her monthly payments would be lower, the arrangements fees were prohibitively more expensive. Glen and Bella took the 90% LTV cashback mortgage with £1000 cashback.
An independent financial advisor can help you find the right mortgage deal for you. Whether you’re looking for a great deal on interest rates or a cash lump sum to help you move, get in touch with a broker and discuss your options now.
My biggest concern was finding a mortgage with no strings attached. My options were clearly explained to me and I felt confident about the decision. Alice Silverman, Stoke-on-Trent
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATION EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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