What is a cashback mortgage?

A cashback mortgage does exactly what it says on the tin — it gives you a chunk of money back when you take out the mortgage. Whether you’re buying your first home or remortgaging your current place, some lenders offer a cash bonus to ease the financial pressure and incentivise you to choose them.

The amount you get varies depending on the lender and the deal. For instance, sometimes it’s a fixed sum, other times it’s worked out depending on the size of your deposit. Whatever the method, you’ll get the cash as a lump sum, either when the mortgage completes or shortly after.

You can use the money however you like. While it’s perfect for helping with moving costs or offsetting stamp duty, there’s nothing stopping you from putting it towards home improvements, kitting out your new kitchen, or even a holiday. However, rates can be higher than a deal without cashback, so do compare overall costs before making a decision.

Are you eligible for a cashback mortgage?

In addition to the usual affordability checks for any mortgage, there might be a few extra requirements to qualify for a cashback mortgage. Here’s what some lenders check:

Cashback criteria

Some may expect you to have a current account with them or be a first-time buyer. Others may offer a higher cashback deal depending on your deposit size. You may also be able to get a cashback deal on a green mortgage, where you buy a property that meets the lender’s energy efficiency criteria.

Your income

Lenders will look at what you earn when deciding how much to lend. Typically, you can borrow up to four and a half times your annual income, or combined annual income if applying for a joint mortgage. Some providers may offer you more, so comparing is essential.

Affordability

You'll need to demonstrate that you can comfortably afford all your mortgage payments, in addition to your other financial commitments like any existing borrowing, utilities and childcare, for example.​

A deposit or home equity

You’ll need some cash to put down on your new home as a deposit, or some equity in your current home if you are remortgaging. A lower loan-to-value (LTV) ratio can help you access more competitive rates.

Credit history

Whilst there isn’t a specific credit score required for a mortgage, having a higher score can boost your chances of being approved. It might be worth checking to see if there is anything you can do to improve your report before you apply for a mortgage.

How much can I borrow with a cashback mortgage?

Many mortgage lenders offer up to around 4.5 times your annual earnings, though some may allow you to borrow more. Going off the typical figure, if you earn £40,000, you might be able to borrow up to £180,000. If you apply jointly with someone earning £30,000, that total could rise to £315,000.

Just bear in mind that your final offer will depend on factors like your affordability, existing borrowing and deposit size. Income’s just part of the picture. Here’s what else a lender might look at when assessing your application:

  • Monthly outgoings: Lenders will consider your regular expenses like bills, credit card payments and childcare costs to make sure the mortgage is affordable for you both.

  • Affordability stress tests: Lenders will check if you could afford your mortgage if interest rates rise.

  • Deposit: The more equity or deposit you have, the better your deal. A lower loan-to-value (LTV) ratio can help you access more competitive rates.

  • Creditworthiness: A solid credit report can really boost your chances of approval, so be sure to check it ahead of your application to see if there is anything you can do to improve your score.

One more thing… your home could be repossessed if you don’t keep up repayments on your mortgage, so make sure you’re comfortable with what you can afford before taking the plunge.

What costs should I budget for when arranging a mortgage?

When applying for a mortgage, remember there are a few costs you’ll need to keep in mind to avoid any surprises:

  • Valuation fees: Lenders will want to know your property's value, so they'll arrange a valuation. Costs can vary, but it's wise to budget for this.​

  • Legal fees: Whether it's a solicitor or conveyancer, you'll need legal help to navigate the process.​ Legal fees for home buying are typically around £2,000 (including VAT at 20%), but the exact cost can vary depending on the property and how complex the work is.

  • Local searches: If you’re buying a property, your solicitor will also carry out local searches – usually costing £250–£300.

  • Arrangement fees: Some lenders charge a fee to set up your mortgage. Expect to pay anywhere between £1,000 to £2,000 or more. ​

  • Early repayment charges (ERCs): Planning to pay off your mortgage early? Be aware of potential ERCs, which can apply if you overpay beyond a certain limit.

  • Survey costs: If you're considering a detailed property survey, this will be an additional expense to keep in mind.​

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