Cashback mortgages- always poor value?

MrFrisk

Greetings all,

Just wondered what opinions are about cash back mortgages. I'm trying to get my overdraft under control - it's now hit £5000 and has risen sharply since my wife stopped work to do a course.

In due course she'll be working again, and contributing to the mortgage etc, but in the mean time, an injection of cash would be very welcome. I've got £100,000 left on the mortgage over 10 years, and a house worth appx £350,000.

I know that cashback mortgages are generally reckoned to be full of catches, but the possibility of moving, for example, to Tipton & Coseley with 8pc - ie. 8K - cash back seems a fair option. Arrangement fee is added to the loan, obviously, but even so, it would get rid of the overdraft and leave me debt-free apart from the mortgage with almost £3K spare.

By contrast, the C&G, who have my mortgage at present, offered me a deal which would cut my monthly payments by £123 a month for two years, (ie. saving just under £3,000) but want me to pay a £500 arrangement fee. For roughly the same saving (assuming I can do a similar deal in two years time) over six years, I'd rather have the money up front.

The only way I'll be able to pay back the whole mortgage in the next six years is if I win the Lottery, in which case, the early repayment fee is unlikely to hurt too much. (Unlikely, though, since I don't play the Lottery).

Would be very grateful for any opinions pointing out the flaws in my thinking, or suggesting a better alternative in the circumstances.

All the best, seasonal greetings etc.

carnet

I took out a cashback mortgage 3 years ago after a lot of calculations and comparisons with other types of mortgages/ lenders etc.

In the end it was decided to go for it because;

1. The lender (Cumberland) didn't charge any arrangement fee.

2. Valuation and legal fees were also paid by them.

3. Their SVR is, in any case, cheaper than most other lenders.

There is a six year tie in but, even so, it still worked out cheaper (taking into account a reasonably likely return investing the cashback sum and a pragmatic view on interest rates over the period ) than, for example, a Nationwide fixed/discount mortgage available at the time.

payless

on the face of it they are not usually as " good" , although some products come up now and again with loopholes - but each case will be different, for example a short term repayment mtg ( if on daily int) would not be as badly hit bing on the higher rate , and also depends on what you are doing with money