2% Cashback for an extra 0.2% interest... worth it?

[Black_Knight]

As the title says. We're to the point of deciding our mortgage provider and rate, and I noticed EBS have an offer on 2% cashback, but their variable rates are 0.2% more than we can get elsewhere. Karl's Mortgage Calculator (cant insert link yet) seems to make a good argument for taking the cheaper variable rate, even if means saving only €20 a month in repayments, and missing out on about €5k cash (our 2%).

Over a 35 year mortgage (assuming we never move, rates never change, and EBS are always 0.2% higher than our other options), it works out as us paying an extra ~12k in interest. Simple so! Take the lower interest rate! It's a no brainer in the long run, isn't it?

Any thoughts on when these cashback offers are a good idea and when they're truly just a gimmick?

 

[Boyd]

Pretty much identical thread here from yesterday.........http://www.askaboutmoney.com/threads/ebs-vs-kbc-advise-appreciated.201616/#post-1496663

Why dont you just take the 2% cashback and switch the next day to the lower rate lender?

 

[Sarenco]

Why dont you just take the 2% cashback and switch the next day to the lower rate lender?

I gather some lenders have a policy not to take on a switcher with less than one year's repayment history with their existing provider so that strategy may not always work.

Depending on the size of the loan, the fixed amount contributions offered by some lenders may not be that much lower than a 2% cash back offer.

I also wouldn't rule out some of the fixed-rate offerings. Fixed-rate products certainly won't be to everybody's taste but they are the lowest mortgage rates available at the moment and there are some market signals that the ECB might start to taper its QE programme next year.

 

[Boyd]

I gather some lenders have a policy not to take on a switcher with less than one year's repayment history with their existing provider so that strategy may not always work.

Any source for this? Which banks?

 

[Sarenco]

Any source for this? Which banks?

Brendan's comment on this thread -

 

[Boyd]

Brendan's comment on this thread -

Cheers. That's a balls.
However, even after 1 year at EBS then switch, you'd still be up about 4k (very rough calculations of 5k cash back - 1k extra interest paid in first year, assuming destination lender covers switching fees)

 

[Sarenco]

However, even after 1 year at EBS then switch, you'd still be up about 4k (very rough calculations of 5k cash back - 1k extra interest paid in first year, assuming destination lender covers switching fees)

Well, yes, but don't forget that some banks are offering a fixed amount contribution of up to €2,000 and you still have to go the trouble of switching. Assuming you place a value on your time, the difference becomes somewhat marginal and vanishes completely at lower loan amounts.

And you are obviously taking on the risk that you won't be able to switch after the 12 months have passed for some reason (change in work/family circumstances, etc.).

 

[Blackrock1]

Well, yes, but don't forget that some banks are offering a fixed amount contribution of up to €2,000 and you still have to go the trouble of switching. Assuming you place a value on your time, the difference becomes somewhat marginal and vanishes completely at lower loan amounts.

And you are obviously taking on the risk that you won't be able to switch after the 12 months have passed for some reason (change in work/family circumstances, etc.).

it shouldnt cost 2k to switch, i got fixed fee conveyancing for a sale and a purchase 1100 for each plus costs, id imagine a switch is similar with a lot less costs to add.

and how much time is really involved, fill a few forms, scan a few documents, some of which you will have already from the initial application

take the point on change in circumstances but you cant live your life worrying about every single potential set back, as it stands there is an opportunity to get some free cash from the bank if you can spare the time it will take to switch, its a no brainer once the mortgage amounts get above 400k imo

 

[Sarenco]

it shouldnt cost 2k to switch

Agreed - switching typically costs in the region of €1,500 (to include valuation, legal, outlay and VAT). However, many lenders are now offering a fixed contribution to all new home loan customers - not just switchers.

and how much time is really involved, fill a few forms, scan a few documents

The process seems to take 4-6 months in most cases reported here and probably involves a time commitment on the part of the borrower of somewhere in the region of 7-10 hours.

its a no brainer once the mortgage amounts get above 400k imo

Agree that it's probably a worthwhile strategy at that level but the net gain is more marginal at more typical loan amounts (we don't all live in big houses in SCD!) and vanishes completely at lower loan amounts.

 

[Blackrock1]

agree with everything above, my point is for 7 - 10 hours of your time, if its 400k or over, it is well worth doing, obviously as the loan value decreases so would ones motivation