If you’re thinking of moving your mortgage to a new deal, a cash back remortgage might look tempting. It promises a lump sum when you switch, but does the cash really help your wallet? Let’s break it down in plain English so you can decide if it’s worth it.
A cash back remortgage is just a regular remortgage with an extra payment from the lender at the start. The lender pays you a percentage of the loan amount – usually 1% to 4% – when the new mortgage is set up. That cash can be used for anything: home improvements, paying off debts, or a holiday.
The trade‑off is that the cash‑back amount is built into the interest rate. Lenders often raise the rate a few basis points to cover the cash they’re giving you. Over the life of the mortgage, that higher rate can add up to more interest than the cash you received.
Ask yourself three quick questions:
If you need a lump sum for urgent repairs, the cash might save you from expensive loans elsewhere. But if you’re only looking for a bonus and plan to move in a few years, the extra interest could eat away at any benefit.
Here’s a quick example. Say you remortgage £150,000 with a 2% cash back offer of 2% (£3,000). The lender adds 0.15% to the interest rate, taking it from 2.5% to 2.65%. Over a 25‑year term, the extra 0.15% costs roughly £5,800 in interest. In this case, the £3,000 cash back isn’t worth the £5,800 extra you’ll pay.
To make a fair comparison, use a simple calculator: take the cash back amount, add the extra interest cost over your expected stay, and see which figure is higher. That tells you if the cash is a genuine benefit.
Also watch out for fees. Some cash back deals come with higher arrangement fees or early repayment charges. Those costs can tip the scales against the cash offer.
In short, cash back remortgages can be handy for a one‑off cash need, but they’re rarely the cheapest way to borrow. Look at the whole picture – cash amount, rate increase, fees, and how long you’ll stay – before signing.
If you decide the cash isn’t worth it, you can still remortgage with a standard deal and keep the lower rate. Use the savings from a better rate to fund any projects you have in mind.
Bottom line: cash back is a trade‑off. It’s useful when you need cash now and plan to stay put, but otherwise the extra interest usually outweighs the bonus. Check the numbers, compare a few lenders, and choose the option that leaves you with the most money in the long run.
Remortgaging can be a savvy financial move, but it raises questions about potential monetary returns. While the primary aim of remortgaging typically involves securing a better interest rate or loan terms, some people hope to release equity and receive money back. The possibility of receiving cash back largely depends on your property's equity and the specific terms of the new mortgage deal. This article delves into scenarios where you might receive money back and how to maximize remortgage benefits.