Short answer
Cashback or a cash contribution can be valuable, but it is not automatically cheaper than a lower interest rate. Compare the result over the period you expect to keep the loan, including clawbacks, legal costs, break fees, valuation costs, package fees, and repayment differences.
Worked example: Priya and Amit compare two offers
Priya and Amit have been with Quiet Pocket Bank for 20 years. Their fixed term is ending. Quiet Pocket offers a retention rate of 6.29% with no new contribution. BGF Bank is competing for new lending in this illustration and offers 5.89% plus a $4,000 contribution, subject to a three-year clawback and switching conditions. They ask for a complete written comparison before deciding.
Illustrative comparison
On an illustrative $600,000 principal-and-interest loan with 25 years remaining, assuming constant rates for 36 months, 5.89% produces approximately $7,177 less interest than 6.29%. Adding an illustrative $4,000 contribution and subtracting $1,600 of switching costs gives a simple illustrative advantage of $9,577 before any clawback. These are teaching figures, not current offers, forecasts, or personalised calculations.
Why is cashback not free money?
The offer may require the borrower to keep the loan for a stated period. If the loan moves or ends early, some or all of the payment may need to be repaid. The contract matters, so ask the lender to explain the condition in writing and record the clawback expiry date.
What can change the result?
The actual rate and fixed period, loan balance, legal and valuation costs, break fees, clawback wording, package conditions, expected time with the lender, and whether the new lender's evidence and property criteria fit can all change the answer.
What is the broker's role?
A broker does not prove value by choosing BGF automatically. The useful work is obtaining a comparable offer, checking conditions, asking Quiet Pocket for a retention response, and placing switching costs beside the rate difference. Priya and Amit can still stay if continuity is worth more to them or the final written comparison changes.
What should you ask before accepting cashback?
Ask whether it is a cash contribution or another incentive, what conditions and clawbacks apply, what happens if you repay or refinance early, which costs apply, and how long it takes for the saving to recover the switching costs.
Evidence categories to organise
- Rate and fixed period
- Contribution amount
- Clawback period
- Legal and valuation costs
- Break fees
- Package and account fees
- Expected time with lender
- Retention offer
This guide is general information only. MoreGage does not provide regulated financial advice, a lending assessment, approval, or an offer.