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A cash back mortgage is a loan offered with a cash back incentive. Some financial institutions in the UK offer this type of mortgage to new borrowers. They get a lump sum payment, which is advertised as free cash and called cashback. In fact, the interest borrowers pay makes up for the cash back. This type of mortgage is popular with new borrowers who use the cashback to buy furniture and other items. Usually, first-time buyers do not have enough money left after making the down payment on their new home.
Cash back mortgages offered by some banks come with a variable interest rate, and borrowers can get up to 6 percent back . They can use the money to different purposes. Cashback may be offered along with a discount rate or a fixed rate scheme. Borrowers receive a small amount of cash back in this case, which can be used to pay the mortgage valuation or for other purposes.
There are pros and cons to having a cash back mortgage. Additional cash is the major benefit, and it is always good to get some extra money when on a tight budget. The new property may need renovation or repair works done before it feels like home. Persons and families that strived to save for a down payment may find it hard to cover their monthly expenses during the first couple of months after taking out a mortgage loan. The idea of getting some extra money sounds appealing. This cash back can be used to make overpayments if the mortgage loan is flexible enough. Alternatively, the extra money can be deposited in a savings account.
It should be mentioned that some financial institutions require that borrowers pay an application fee. Another downside is that this type of mortgage is usually offered with a higher interest rate compared to other mortgage products on the market. Many costs associated with the home-buying process have to be paid before completion meaning that cash back will not help. These include searches, registry, survey, and other fees.
The idea of getting cash back sounds attractive, but there are other factors to consider. For instance, borrowers may face high redemption penalties. The penalty applies over a longer period if the cashback amount is substantial. Changing lenders may also involve a penalty clause.
Some building societies and banks in the United Kingdom offer cash back mortgages, for example, the Leeds Building Society, the Woolwich Building Society, Abbey Bank, and others. At the same time, it may be wise to opt for a cheaper deal, even though cash back mortgages offer extra cash. The types of mortgage loans popular with borrowers do not require additional incentives to sell well. Finally, it should be noted that the rate and tie-in may be fixed over a specified period of time.
Cash back mortgages offered by some banks come with a variable interest rate, and borrowers can get up to 6 percent back . They can use the money to different purposes. Cashback may be offered along with a discount rate or a fixed rate scheme. Borrowers receive a small amount of cash back in this case, which can be used to pay the mortgage valuation or for other purposes.
There are pros and cons to having a cash back mortgage. Additional cash is the major benefit, and it is always good to get some extra money when on a tight budget. The new property may need renovation or repair works done before it feels like home. Persons and families that strived to save for a down payment may find it hard to cover their monthly expenses during the first couple of months after taking out a mortgage loan. The idea of getting some extra money sounds appealing. This cash back can be used to make overpayments if the mortgage loan is flexible enough. Alternatively, the extra money can be deposited in a savings account.
It should be mentioned that some financial institutions require that borrowers pay an application fee. Another downside is that this type of mortgage is usually offered with a higher interest rate compared to other mortgage products on the market. Many costs associated with the home-buying process have to be paid before completion meaning that cash back will not help. These include searches, registry, survey, and other fees.
The idea of getting cash back sounds attractive, but there are other factors to consider. For instance, borrowers may face high redemption penalties. The penalty applies over a longer period if the cashback amount is substantial. Changing lenders may also involve a penalty clause.
Some building societies and banks in the United Kingdom offer cash back mortgages, for example, the Leeds Building Society, the Woolwich Building Society, Abbey Bank, and others. At the same time, it may be wise to opt for a cheaper deal, even though cash back mortgages offer extra cash. The types of mortgage loans popular with borrowers do not require additional incentives to sell well. Finally, it should be noted that the rate and tie-in may be fixed over a specified period of time.
About the Author:
Yorkshire Building Society in Britain is one of the top UK financial institutions. Learn interesting facts about other Banks in Britain at UK Banks.
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