The Truth About Bank Cashbacks: What $20,000 Really Means

The highly publicized "cashback wars" between banks have many Kiwi homeowners wondering how to claim their share of advertised $20,000 incentives. But what's the real story behind these attention-grabbing headlines?

We break down exactly how mortgage cashbacks work, revealing the often-overlooked mathematics behind these offers. While $20,000 sounds incredible, this would require borrowing over $2 million, as cashbacks typically represent just 0.8-0.9% of your total loan amount. For the average New Zealand mortgage of around $500,000, a more realistic expectation would be approximately $4,500.

Beyond the dollar figures, we explore the crucial fine print that accompanies these offers. Most banks require you to remain with them for three years after receiving a cashback, with pro-rata clawback conditions if you leave early. We also discuss the lesser-known concept of cash retention, where your existing bank might offer financial incentives to prevent you from refinancing elsewhere.

Making the right decision requires careful consideration of multiple factors: potential cashbacks, legal costs, break fees for existing fixed loans, and possible retention offers from your current lender. Rather than being swayed by headline figures, it's worth consulting with a mortgage advisor who can calculate whether staying or moving makes more financial sense for your specific situation.

Have questions about whether a cashback offer might benefit your mortgage situation? Reach out to discuss your options and determine if the timing is right to take advantage of the current competitive banking environment.

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