Are Refinance Cashback Offers Worth It, or Is There a Catch?
If you’ve looked into refinancing recently, you’ve probably seen banks offering a few thousand dollars just for switching your loan. These are known as refinance cashback offers. They sound simple enough. Take out a new loan, get a lump sum in your bank account.
But is it free money, or is there a catch?
What Is a Refinance Cashback?
A refinance cashback is a one-off cash payment from a lender when you move your home loan across to them. Most offers range from $2,000 to $4,000. Once your loan settles, the money is deposited into your account.
Plenty of borrowers use it to cover discharge fees, legal costs or even minor renovations. In the short term, it can look like a solid win.
If your new loan has a good interest rate, and the fees are reasonable, then the cashback is just a welcome bonus.
Why Lenders Offer Cashback Deals
Between 2020 and 2022, competition between banks was intense. Refinancing activity was high, and cashback deals helped lenders attract new business quickly.
At the peak, more than 35 lenders were offering some kind of cashback. That number dropped sharply in 2023 as the major banks began pulling back.
Why? Because cashback offers don’t always result in long-term customers. Some borrowers take the money, then refinance again a year or two later.
That should be a reminder. Cashback offers are designed to benefit the lender too.
When Cashback Can Be a Smart Move
There are cases where a refinance cashback makes financial sense.
Let’s say you are already planning to switch loans because you found a better rate. If the lender offering the cashback also has a competitive product, then the bonus can offset your refinance costs and still leave money in your pocket.
Example: You refinance a $600,000 loan and receive a $3,000 cashback. You pay $1,000 in discharge and setup fees. You’re still ahead by $2,000, and your new rate is lower than before.
In that case, the cashback has real value.
The Risks and Hidden Costs
Where people get caught out is assuming that all cashbacks are created equal. They are not.
Here’s what to check:
- The interest rate:
If your new loan has a higher rate than other options, you could end up paying more in the long run. A cashback might make the loan look attractive upfront, but even a 0.20 percent higher rate could cost thousands over a few years. - The loan features and fees:
Make sure you’re not giving up flexibility or paying for features you won’t use. A basic loan with a lower rate might save more than a cashback option with bells and whistles you don’t need. - The eligibility criteria:
Most offers require a minimum loan amount, often $250,000 or more. Some are only available for owner-occupiers, or if you have at least 20 percent equity. - The comparison rate:
Always look beyond the advertised rate. The comparison rate includes fees and reflects the true cost of the loan.
Why Many Lenders Have Pulled Out
By late 2023, banks like CBA, NAB and Westpac dropped their cashback offers.
Instead, they focused on competing with better pricing or service. In many ways, that’s a return to basics. A cashback gets attention, but it doesn’t guarantee value.
Some experts have warned that borrowers can be distracted by the “sugar hit” of a few thousand dollars, while overlooking better deals that would save more over time.
Are Cashback Offers Still Worth Considering?
They can be, if:
- You already plan to refinance
- The loan is competitive on rate and fees
- You qualify without having to stretch or compromise
Think of the cashback as a bonus, not the reason to switch. The best outcome is when a strong loan comes with a cashback attached. The worst case is choosing a subpar loan because the cash looked too good to pass up.
Final Word
Refinance cashback offers are not automatically good or bad. They are simply one part of the bigger picture.
The key is to do the maths. Compare the total cost of the loan over time, not just the upfront bonus. Look at your goals too. If you’re planning to hold the loan for a few years, the rate and structure matter much more than a one-time payment.
If you’re not sure how to compare all of this, a broker can help you assess what’s on offer across multiple lenders. That way, you’re not guessing or relying on marketing headlines.
And if the right loan comes with a cashback, great. Just make sure the numbers stack up.