Home loan cashback offers explained
A few thousand dollars upfront is tempting, but a lower rate compounds every month. Here’s how to work out whether a cashback deal actually leaves you ahead, and the fine print to read before you switch.
- A cashback is a one-off payment; a lower rate saves you a little every month for the life of the loan.
- On a large loan, a rate gap of 0.30% or more can wipe out a few thousand dollars of cashback within a couple of years.
- Check eligibility, minimum loan size and any clawback period before you switch.
What a home loan cashback offer actually is
A cashback offer is a one-off payment a lender makes when you take out or refinance a home loan with them, typically a few thousand dollars, paid into your account a few weeks after settlement. It’s a marketing tool to win your loan, and it can be genuinely useful for covering the costs of switching. The catch is that it sits next to the loan’s interest rate, which is where the real long-term cost lives.
This guide works through the two questions that matter: does the cash actually beat choosing a lower rate, and what conditions are attached. We use owner-occupier, principal & interest loans as the worked example throughout.
What is on the market today
The figures below are counted from each lender’s own published data, and exclude any product we hide from the comparison tables. They cover owner-occupier and investment home loans alike.
29 of those offers mention refinancing in their own conditions, which is the usual reason a lender pays one. The conditions are the lender’s words, not ours, and they decide who is eligible. Compare home loans with a cashback offer to see the current list with each offer’s conditions attached.
Does the cashback beat a lower rate?
The honest answer is “it depends on the size of the rate gap and how long you hold the loan”. A cashback is paid once; a lower rate keeps paying you back every month. The way to compare them is to convert both to dollars over the period you expect to keep the loan.
The 0.55% rate gap is worth roughly $2,750 in interest a year on a $500,000 balance. Loan B overtakes the $3,000 cashback after about 13 months, and keeps pulling ahead for as long as you hold the loan. The cashback only wins if the rates are close, or you plan to refinance again very soon. The balance here is illustrative; the cashback is the amount lenders most commonly publish today.
The rates in this example are illustrative, not offers from any lender. Compare real loans on the comparison rate, which includes most fees as well as the interest rate.
Cashback, low rate or offset?
Cashback isn’t the only way a loan can save you money. A consistently low rate and a full offset account both reduce what you pay (often by more, over time). The matrix below summarises which approach suits which borrower.
| Feature | Cashback | Low rate | Offset |
|---|---|---|---|
| Cash in hand upfront | Yes | No | No |
| Lowest long-run cost | Sometimes | Yes | Often |
| Helps cover switching costs | Yes | Sometimes | No |
| Rewards a savings balance | No | No | Yes |
| No clawback if you leave early | Often not | Yes | Yes |
The fine print: eligibility and clawback
Two cashback offers with the same dollar figure can be very different once you read the conditions. Before you switch for a cashback, confirm each of these against the offer terms:
- Who’s eligible (refinances only, or new purchases too) and any minimum loan size.
- The maximum LVR; many offers require you to be at or below 80%.
- Whether the loan you must take to qualify carries a higher rate or annual package fee.
- The clawback period: how long you must stay before the lender stops being able to reclaim the cash.
Frequently asked questions
Do I pay tax on a home loan cashback?
For most owner-occupiers a cashback on their own home loan isn’t treated as assessable income, but the treatment can differ for investment loans. Confirm your position with a registered tax adviser.
Can I refinance again straight after taking a cashback?
Many cashback offers include a clawback clause that lets the lender reclaim the payment if you discharge or refinance within a set period, which varies by lender and is stated in the offer terms. Check the terms before switching again.
Are cashback offers only for refinancers?
No. Some offers are open to new purchases as well as refinances, but eligibility, minimum loan size and LVR limits vary by lender. Always read the specific offer terms.
This guide is general information only and does not take your personal circumstances into account. It is not credit advice and CompareThat is not a credit provider. Worked-example figures are illustrative.