Cash-Back offers, Beware the sting in the tail.
There are many Banks offering mortgage holders generous Cash-Back offers of up to $5,000 if they refinance. However, CEO of Healthcare Finance Steve Daley warns potential borrowers to check the small print.
These seemingly generous cash-back deals can ultimately cost clients tens of thousands of dollars in extra interest, once the “Honeymoon” is over.
Lenders continue to market cash-back loans as a re-financing Hook and are very profitable for those Lenders especially when it’s a direct customer.
The problem for clients comes after one, two or three years when the loan reverts back to its “Revert Rate”. These are often higher than the rest of the market and clients need to be aware of what they are.
The Banks know that most direct-to-bank clients will not be well advised, will not read the details of the mortgage contract, may not notice the increase or will not be able to re-finance away.
Those clients will spend many years paying higher rates than necessary as what are known as “Mortgage Prisoners” trapped in non-competitive home-loans.
Whilst these offers are not all bad, clients should seek the advice and experience of a skilled broker who can clearly show the components of each Bank’s offering.
Remember an experienced broker should take a longer term view of each client’s financial well-being and any loan’s competitiveness over time and will help ensure their clients do not make costly mistakes.
The old adage is true. If it sounds Too good to be True… then it probably is.
We’ll let you know as soon as the Banks start giving away free money, until then it’s best to get some expert advice.
Steve Daley CEO Healthcare Finance Steve@HealthcareFinance.com.au
The above is general information only and is NOT accountancy or Tax advice. Accordingly, the information on this site is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult your accountant or advisor.