A home loan cashback is only worth it if the rate is also competitive. A $4,000 cashback on a loan that charges 0.25% more than the best alternative is used up in under three years on a $600,000 loan, and after that it costs you about $1,500 a year. Before you switch for a cashback, compare the extra interest you’d pay over the time you expect to keep the loan, and check the conditions that let the lender take the money back.
How home loan cashbacks work
Some lenders pay refinancers a one-off amount, often $2,000 to $4,000, when the new loan settles. It’s usually paid into your transaction account within a few weeks. Cashbacks typically come with conditions, such as a minimum loan size, a maximum LVR, owner-occupier loans only, or opening a transaction account.
Lenders use cashbacks to win customers because they’re cheaper than a permanent rate cut: the cashback is paid once, while a lower rate costs the lender every year you stay.
The break-even point
Here is a $600,000, 30-year principal and interest loan. Loan A pays a $4,000 cashback; Loan B has no cashback but a lower rate.
| Years after switching | Extra cost of Loan A at 0.25% higher | Extra cost at 0.10% higher |
|---|---|---|
| 1 | About $1,500 | About $600 |
| 2 | About $3,000 | About $1,200 |
| 3 | About $4,500 | About $1,800 |
| 5 | About $7,500 | About $3,000 |
| Break-even vs a $4,000 cashback | About 2.7 years | About 6.7 years |
Our calculations, including the higher repayments and slower reduction of the loan balance, excluding fees. The bigger the loan, the faster a rate gap overtakes the cashback.
Rules of thumb:
- If the cashback loan’s rate is the same or within a few basis points of the best rate you can get, the cashback is a genuine bonus.
- If the rate is 0.2% or more higher, you’ll probably be worse off within three years.
- If you’ll sell or refinance again within a year or two, a cashback can come out ahead even with a slightly higher rate, as long as there’s no clawback.
Look past the cashback
Compare the interest rate and comparison rate, the fees you’ll pay to switch, and the features you’ll lose or gain. Switching costs can include a discharge fee from your old lender, application and valuation fees, government registration fees and, on a fixed loan, break costs. If those add up to $1,000 or more, the cashback’s real value shrinks accordingly.
Also check the revert rate. Some lenders offer a sharp rate with a cashback to new customers, then let it drift above market over time. Plan to review your rate every year or two.
Use the offer to negotiate
A cashback offer from another lender can be useful leverage. Ask your current lender to negotiate: a 0.25% rate cut is worth more than a $4,000 cashback over the life of most loans, and staying avoids switching costs. If they won’t move, compare the full cost of switching before you refinance.
When a cashback makes sense
- The rate is among the lowest available for your LVR and loan type.
- You were going to refinance anyway, and the cashback covers your switching costs.
- The conditions are simple and there’s no clawback period, or you’re confident you’ll stay past it.
- You’ll put the cashback towards the loan or your offset, rather than treating it as spending money.
Frequently asked questions
Is a cashback better than a lower interest rate?
Usually not, unless the rates are almost the same. On a $600,000 loan, a rate 0.25% higher costs about $1,500 a year, so a $4,000 cashback is used up in under three years. A lower rate keeps saving you money for as long as you have the loan.
Is a home loan cashback taxable?
For a loan on the home you live in, a refinance cashback generally isn’t treated as income. If the loan is for an investment property, the tax treatment can be different and may affect your deductions, so check with a registered tax agent or the ATO before you lodge.
Can a lender claw back a cashback?
Some can. Read the terms: some lenders can recover the cashback if you refinance away or repay the loan within a set period, often one to three years. Others have no clawback. If you’re likely to move or refinance again soon, choose an offer without one.
Sources
- ASIC Moneysmart, Switching home loans
- ASIC Moneysmart, Comparison rate
- Canstar, Average home loan interest rates, as at 2 October 2026
General information only. It does not consider your objectives, financial situation or needs and is not credit, tax or financial advice.