Should you choose a cashback mortgage?
Costs can spiral when you buy a property or switch, so a cashback mortgage can provide a boost when you need it most. Here’s all you need to know about cashback mortgages in Ireland.
What is a cashback mortgage?
It’s a mortgage that gives you money back as a cash lump sum when you complete. The cash is either:
- A percentage of the mortgage e.g. 3%, or
- A fixed lump sum, such as €1,000
Several mortgage lenders in Ireland offer cashback to help pay professional or legal fees.
Who can get a cashback mortgage?
Cashback mortgages are available to most borrowers, including:
Eligibility criteria for cashback differs between lenders and is subject to their terms & conditions.
How do cashback mortgages work?
Cashback mortgages work by releasing funds from the money you borrow. You do not pay tax or interest on the cash amount.
The cash is normally paid in one lump sum directly into your bank account, after you drawdown the mortgage. You will normally get the cash within two months of drawdown, although some banks may provide the cash upfront.
Drawdown is when your bank issues the cheque to your solicitor to pay for the property you are buying.
Some lenders also offer monthly cashback, but usually only if you have a current account with your mortgage provider.
How much cashback could you get?
Mortgage cashback is typically around €2,000, although if you choose a mortgage cashback deal based on a percentage of your mortgage, then the higher your mortgage, the more cashback you are eligible for.
Here’s an example:
|Mortgage amount||1% cashback||2% cashback|
Which banks offer cashback mortgages?
Five mortgage lenders offer cashback mortgages in Ireland at the moment but check the terms & conditions before you apply.
Here’s an overview of the cashback deals running at the moment.
|Lender||First time buyers||Switchers||Additional info|
|Allied Irish Bank||-||€2,000|
|Bank of Ireland||2%||2%||Plus 1% in 5 years for BOI account holders|
|EBS||2%||2%||Extra 1% in 5 years|
|Haven||€5,000||€5,000||Eligible for mortgages over €250,000|
|Permanent TSB||2%||2%||2% monthly offer for Explore account holders|
Pros and cons of cashback mortgages
While cashback mortgages provide a helping hand when money is tight, there are other factors to consider. Here’s a look at the pros and cons of cashback mortgages:
- Cash when you need it most
- Sizeable cash amounts for big mortgages
- You can reduce your mortgage if you switch regularly
- Cashback is tax-free
- Often sold with higher interest rates
- Mortgage may cost more in the long term
- Could forfeit cash if you overpay your mortgage
- Breakage fees will apply for fixed term deals
How to choose the best cashback mortgage offer
Once you’ve weighed up the short term advantage of a cashback mortgage with the overall long term cost of the mortgage, use our free mortgage comparison tool to find the best cashback deals and compare lenders.
Our simple mortgage calculator allows you to tailor your results using property value, mortgage amount and repayment term.
When you are choosing a cashback mortgage, consider:
- Repayment term: If you intend to switch regularly for cashback choose a variable or short term fixed deal.
- Interest rate: This is the headline rate of interest offered by the lender, the lower the interest rate, the less you pay for the mortgage.
- Indicative APRC (Annual Percentage Rate of Charge): This gives you the typical rate of interest of a mortgage of €100,000 over a 20 year term and is a more realistic indicator of the rate you’ll be offered. The APRC shows the overall cost of the mortgage including fees and charges.
- Monthly payment: This tells you how much you can expect to pay for your mortgage each month at the shown rate of interest.
It’s a good idea to use a broker if you are considering a cashback mortgage. A broker can calculate the overall cost of the mortgage and work out how much you could save or lose by opting for a cashback mortgage.
Always check the terms and conditions carefully before applying for a cashback mortgage so you don’t get caught out by hidden charges or specific conditions.
Where to find out more about mortgages
Whatever stage of the housing ladder you are on, we have lots of helpful information to guide you through.
If you are planning to remortgage or move house, our guide, How to switch to a better mortgage deal, provides helpful information for choosing the best deals.
If you are not quite sure where to start on your house buying journey, Your complete guide to mortgages is a great place to begin.
Cashback mortgages FAQs
Can I get a cashback mortgage on a buy to let property?
Yes, but it depends on the lender. Some do not offer mortgage cashback deals for buy to let investors, only a couple of banks do.
Check the eligibility criteria for each bank or lender to see if you qualify.
Do I have to pay tax on the cashback?
No, any mortgage cashback you get is tax-free.
How often can you switch to a cashback mortgage?
As often as you like; there is nothing to stop you from switching mortgages regularly because lenders are not allowed to claw back any cash given.
However, there may be conditions around overpayment and if you are on a fixed-term deal you will still be liable for breakage fees.
Is there a limit to the amount of cashback I can get?
No, most banks don’t set a limit on how much cashback you can receive.
If you’re taking out a particularly large mortgage with a lender it’s advisable to confirm how much cashback you’ll get on your mortgage amount.
What does APRC mean?
APRC stands for Annual Percentage Rate of Charge (APRC) and indicates the total cost of your mortgage over its term, taking into account the interest rate charged and other costs such as valuation fees and charges paid to the Property Registration Authority (PRA).
It’s expressed as an annual rate and credit providers are required by law to show it when advertising loans and borrowing rates.
The Interest Rate is the actual rate at which interest is charged on the amount you borrow, therefore the figure is always lower.
Compare mortgage rates & deals
Find the best first time buyer and home mover mortgage deals in Ireland using our comparison.