When you apply for a a mortgage (either a new loan or refinancing from another bank) you may get discounted interest rates and a cash incentives.
Sometimes also known as a cash-back, when a bank offers a cash incentive it’s generally given by the bank to “buy” your business. The banks all want your business and if they can lock you in as a customer then they will make money from the mortgage and the other products that they can get you to sign up for. Banks tend to promote products like credit cards, personal loans, insurance and KiwiSaver all of which help the banks make their large profits.
While a cash incentive is appealing, it should not be the primary reason to select a specific bank.
A mortgage adviser will look at options for you, and when selecting a mortgage they will look at the features of a mortgage, the interest rates being offered and anything else such as cash incentives that may make one bank stand out from the others. Some banks make it easier to pay the loans off faster, other may offer the lowest home loan rates and then there will be those banks that offer cash incentives.
Banks do not offer cash incentives because they want to be nice – it’s part of the overall strategy they they use to attract people as customers so they can make more money from you.
If you are dealing with the banks directly then you should be aware of this and also consider the whole package too.
The amount of the cash incentive is going to depend on your overall profile which includes the loan amount, the value of your property and your income. Your mortgage adviser will know how hard they can negotiate too.
But also be aware that the banks do lock you into a minimum period, and should you repay that mortgage or refinance to another bank within that period then you will need to pay that cash incentive back to the bank. Not all banks are created equal and while most banks will seek any cash incentive be repaid for up to 3-years, some banks do vary or scale what they ask is repaid.
