Property Investment
8 min read
Mortgage cashbacks give you, what feels like ‘free money’ when you take out a mortgage.
Just the other day, I helped a client switch their $400,000 mortgage to a different bank. The new bank gave them $3,600 to switch.
That’s money this investor could spend on whatever they like.
As a mortgage adviser I often help homeowners and investors either take out new mortgages or switch banks (refinancing).
Often that means you can get a cashback. But, that opens a lot of questions. Who can get a cashback? How big are they? And is it worth switching banks just to get a cashback?
In this article, you’ll learn how mortgage cashbacks work, who qualifies, and when refinancing actually makes sense.
Mortgage cashbacks can put real money in your pocket ... but they’re not “free.” Check the rules, costs, and steps to make sure the deal actually leaves you better off.
A cashback is a lump sum of money a bank gives you when you sign up for a mortgage.
Banks make money when you borrow from them, and they’re all competing for your business.
So to win you over, they’ll dangle a shiny cashback in front of your new loan or refinance package.
Typically, a cashback is around 0.8% - 0.9% of your loan amount.
So if you take out a $500,000 mortgage, you could get $4,000–$4,500.
At the time of writing, banks ANZ, BNZ and ASB have increased this percentage to 1.5%. That means on the same $500k mortgage, the cashback is now closer to $7,500.
You can spend it however you like. You can spend it on legal fees (to buy a house), pay for a valuation, buy new furniture, or even go on holiday.
But there are fishhooks and terms and conditions. Because while it feels like ‘free money’ … it’s not really. And if you switch banks or pay off your mortgage early you might have to pay some of it back.
You can often get a cashback when you take out a mortgage from a bank.
That often happens in two situations:
Most borrowers get cashbacks. But, not everyone does.
Each bank has its own rules, but there are a few common conditions you’ll usually need to meet:
Generally speaking, banks typically only offer cashbacks for mortgages above $200,000 - $250,000.
So if you have a smaller mortgage (say around $100,000), you probably won’t get a cashback.
But this isn't the case for all situations.
Your mortgage also can’t be too big compared to your property’s value. This is called the Loan to Value Ratio (LVR).
To get a cashback as a homeowner you often need to have an 80% LVR or less.
So if you own a $500,000 home, you’d need your mortgage to be $400,000 or less. That’s 80% of the home’s value.
If your mortgage was $450,000, you wouldn’t meet the criteria to get a cashback (most of the time).
To get a cashback you’ll usually need your mortgage to be:
There is an exception for New Builds. For instance, if you buy a New Build investment property you’ll often get a cashback if your mortgage is 80% of your home’s value or less.
If you don’t meet these thresholds, you might still get a mortgage … but not a cashback.
So, what happens if your property’s value has dropped since you bought it and your equity has fallen below these thresholds? You might not get a cashback if you then decide to switch banks.
Often borrowers get mortgage cashbacks when they refinance and move their home loan between banks.
But you can’t move your mortgage from Bank A to Bank B, unless Bank B will lend you the money.
So let’s say you bought a house and took out a mortgage. Then you quit your job and start a new business. Bank B might not approve your mortgage if your business is new.
And if you can’t move your mortgage, you can’t get the cashback.
Mortgage cashbacks aren’t free money. The banks give them to you so you stick with them.
To get the cashback you’ll typically sign an agreement with the bank to stay with them for 2-3 years. That’s the clawback period.
If you switch banks or pay off your mortgage within the clawback period, you’ll need to pay some of the mortgage cashback back.
This is often pro-rata. Let’s say you received a $6,000 cashback when you took out your mortgage. As part of that you agreed to stay with the bank for 3 years.
If you refinance to a new bank after 2 years, you might need to pay back, $2,000.
That’s because you broke the agreement with 1/3rd of the time early. So you’d have to pay back 1/3rd of the cashback.
You often can get a new mortgage cashback every 2 – 3 years. It’s often better to do this once you are out of your clawback period.
To do that you’ll need to refinance and move your mortgage from one bank to another.
You can often get a cashback each time you make the move. But remember, if you try to move your mortgage from Bank A to Bank B, you still need to pass Bank B’s lending criteria.
So you need to get your mortgage approved by Bank B. And Bank B might not approve your mortgage if your income or house value has gone down.
So it’s not a guarantee that everyone can switch banks every 3 years just to get a mortgage cashback.
If you’re thinking about refinancing, here are 5 steps to go through:
Step #1 – Run the numbers.
Estimate what the cashback will be and subtract all costs. If it’s still going to be worth it for you, then you speak to a mortgage broker.
For instance, you might get a $6,000 cashback if you move your loan. But, let’s say you fixed your interest rate for 5 years when interest rates were high. You might have to pay a $10,000 break fee (for example) to break that interest rate agreement.
In that case, it might not be worth switching banks.
Step #2 – Talk to your adviser (or bank).
Ask about clawback timing on your current loan and whether you’ll have to pay a break fee for paying off your mortgage early.
I say the best time to switch is near the end of your fixed term, you’re less likely to face a break fee.
Step #3 – Apply to the new bank.
You’ll need to actually apply for a new mortgage from your new bank.
Different banks have different lending criteria. So you’ll still need to provide proof of your income, statements, liabilities, and property details. Sometimes, you’ll need to order a valuation for your house.
And you’re not always guaranteed a ‘yes’. Even though you’ve got a mortgage in the past.
Step #4 – Get approved and sign docs.
If you do get approved, you need to formally move your mortgage to the new bank. That means you need to talk to your lawyer and sign the loan documents.
Step #5 – Start banking with your new bank
Your salary often needs to be paid into the new bank (a standard loan condition).
For investors, the bank may require rent from the refinanced property to flow into that bank too.
Getting a mortgage cashback isn’t free. That’s because getting a new mortgage (when buying a house) and even moving your mortgage costs money.
Let’s say you already have a mortgage and decide to switch banks. Here are the costs you might have to pay:
| Cost | Who you pay | How much | When you pay it |
| Break fee | Your current bank | $0 - $10k | If you are breaking your fixed interest rate early |
| Clawback | Your current bank | $0 - $5k | If you change banks in the first 2-3 years of getting the cashback |
| Discharge fee | Your current bank | Around $100 | Usually each time you move your mortgage |
| Valuation | The valuation company | Around $1,000 per property | Not always required. But it's common if you're refinancing more than one property |
| Legal fees | Your lawyer | $1k - $1.5k | Almost always required |
So even if you switch banks and get a $5,000 cashback, that might not be $5,000 of ‘profit’. Because it might also come with $2,500 worth of costs.
Getting a cashback can still leave you better off. But, it’s not cost-free.
The banks are very profitable. So they will compete for your mortgage. Sometimes they’ll come up with other incentives to entice you to take out a mortgage with them.
For instance if you take out a mortgage with Kiwibank, you might be able to avoid paying for a lawyer altogether.
It’s not that Kiwibank pays your legal costs … but they have in-house lawyers who handle straightforward refinances for free.
Put simply, they’ll do all the legal stuff of moving your mortgage to Kiwibank at no cost to you.
And yes, you can still get their cashback incentive on top of that free refinance service.
This is a Kiwibank-only service. No other bank currently offers this.
There are a few catches, though. This offer only applies to simple refinances (or first time mortgages) in personal names. So, you can’t get this incentive if you own a property in a trust, company, or have a guarantor.
You’ll also need to meet their standard mortgage eligibility criteria.
If you’re interested, it’s worth checking Kiwibank’s website or talking to your mortgage adviser to see if it’s right for you.
Mortgage broker for over 10 years, property investor and Managing Director at Opes Mortgages
Peter Norris, a certified mortgage adviser with 10+ years of experience, serves as the Managing Director at Opes Mortgages. Having facilitated over $1.2 billion in lending for 2000+ clients, Peter is a respected authority in property financing. He's a frequent writer for Informed Investor Magazine and Property Investor Magazine, while also being recognized as BNZ Mortgage Adviser of the Year in 2018 and listed among NZ Adviser's top advisers in 2022, showcasing his expertise.
