What is "Cash Back" when taking out a mortgage?

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Posted 2 years ago by Pope & Co. Mortgages

One of the strange things about getting a mortgage in New Zealand is that banks are willing to give cash to help incentivise you to get a mortgage with them. These sort of cash incentives are not available in Australia.

It used to be called 'legals' or 'legal contribution' back in the day when I first started as a broker in 2005. Back then we would be lucky to get $250-$750 towards legal costs. On really big loans maybe $1000-$1250 was possible, usually with proof of the lawyers conveyancing invoice. 

These days if you have a 20% deposit or more then the cash incentive is often around 0.6% of the loan amount depending on the bank.

A couple of years ago the banks were even throwing silly money at people refixing their mortgage. Great for the consumer, but not sustainable and hence these days it's not common to get any cash incentives when refixing your rate. Cash incentives still exist for new loans.

Two or three years ago when banks were throwing big sums of cash to entice borrowers, they did so without too much thought about loyalty from the borrower.

It took a while, but the banks soon introduced more stringent criteria around the cash incentive, so now your loan usually has to be with the bank at least three years and includes having a salary credited to the bank. You may even be required to have a credit card or insurance product as well.

Whilst cash incentives are nice they are not a key reason for choosing a bank, but are one part of the overall decision. Your Pope & Co. mortgage broker can explain the pros and cons of the incentive and how it relates to each bank.

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