Hidden strings attached to mortgage incentives

fine print

Posted 4 years ago by Craig Pope

Banks are starting to get tough on customer incentives, as their margins get tighter and they demand more loyalty from their customers. Some banks are even clawing back cash incentives from people trying to move their mortgages elsewhere.

Cash sweeteners are commonly offered to customers to secure their business. When I first started in the mortgage industry most offers would range between $250–$500, or go up to $1000 on a good day. Fast-forward to a year or so ago and sweeteners of up to $10,000 or more were offered for larger loans. Those days are now gone, but it’s still common to see offers on average between $500–$4000 made on standard mortgages with a minimum 20% equity. Those with less than 20% deposit have much less chance of getting a cash incentive.

It’s easy to think of this as ‘free’ money, but in reality it’s much more like a prepaid loyalty bonus. In accepting an incentive there are the finer details to consider. You may need to have a mortgage with a bank for a minimum of two to three years, and have your salaries paid into an account with the lending bank. If you leave a bank before the minimum period, the bank can ask for that ‘free’ money back, or build it into your break costs. This has caught a few people out who had forgotten about the loyalty conditions.

We’ve worked with clients that have had no choice but to pay back their incentive because there were circumstances like a marriage break-up or job relocation as the reason for changing banks or selling up.

Mortgage incentives are a nice to have, but shouldn’t be the only reason you change banks. Some important questions to ask are:
Is the overall package better than what you have now?

  1. Will the new lending help you get mortgage-free faster?
  2. What is the fine-print? How long will I be locked in for?
  3. Do I intend to stay with this bank for the short or long term?
  4. Am I planning to sell the property and repay the mortgage in the near future?


To answer these questions we recommend talking with a trusted mortgage adviser. We are experts in the loan offer fine print, and will be able to let you know what your responsibilities to the bank are as a borrower. Not to mention getting mortgage-free quicker with a clever structure. 

It can be easy to get blindsided by the lump sums on offer by the banks, but we expect to see incentives start tracking back down as the market evens out. A mortgage is your biggest financial commitment so consider all that’s on offer before shifting banks, and talk to us before making a decision.

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