How to get paid to refinance your mortgage

Some lenders are offering borrowers up to $4000 to refinance their mortgage to a lower rate. But is there a catch?

Australian homeowners with outstanding mortgages appear to be making the most of increased competition in the home loan market to score themselves a better deal.

Rather than being content with any rate reductions passed on by their lenders following multiple RBA rate cuts, more borrowers have been switching loans.

98,681 loans were refinanced by owner occupiers and investors in the June quarter, ABS lending data shows - up 18% on the same period in 2024.

"I think word is slowly filtering out that loyalty with lenders these days doesn't count," says Stephen Zeller, general manager of money at Compare the Market.

"Unless you're proactive and approach your lender for a discounted rate, you're unlikely to get any more than the RBA cut. And that's providing your lender passes on the full cut, which they don't always do.

"So, it's always good to review your rate every 12 months and, if your lender isn't going to come to the party, there's other options out there."

The prospect of a lower rate isn't the only sweetener being used by lenders to attract more business though. Some are even providing thousands of dollars in cashback.

What is mortgage cashback?

"The mechanics are pretty straightforward. Lenders offer a lump sum (usually a few thousand dollars) at settlement as an incentive to refinance," says mortgage broker and chief executive at Flint, Christian Stevens.

As Stevens notes, cashback deals tend to be offered to people who are willing to refinance their loans, though a handful of lenders are also currently providing offers on new loans too.

Whether it's a refinance or a brand-new loan, borrowers may need to jump through a few additional hoops to secure a cashback deal, on top of whatever's required to qualify for the loan itself.

"Beyond the normal refinancing criteria, lenders often set minimum loan sizes (commonly $250,000 to $500,000 or more), limits on maximum loan-to-value ratios (often capped at 80%), and sometimes even restrict the cashback to certain products," Stevens says.

"So, while the base requirements are the same as refinancing in general, there are typically additional eligibility rules to actually qualify for the cashback."

Which lenders are offering cashback?

The reality is that cashback deals aren't quite as plentiful as they were a few years ago. However, that's not to say that they aren't any offers on the market.

"Back in 2023, we had about 30 lenders offering cashback, but that's now filtered down to about 12 or 13 currently in market," Zeller says.

"It's the non-major lenders offering the bulk of the cashbacks right now. ANZ is the only major that has kept their offer, whereas the Commonwealth Bank, NAB and Westpac have withdrawn their ones.

"The highest in market at the moment is up to $4000 cashback with IMB Bank. That's up to 80% LVR, it's for refinance only and the loan amount will need to be $750,000 at a minimum."

Going forward, Zeller says that he wouldn't be surprised to see more cashback deals and other incentives appear as lenders look to offer a point of difference to attract new customers.

"Spring is usually the time when banks start to bring out additional offers to market.

"In the past, we've seen them waive lenders mortgage insurance, regardless of the LVR, and we've seen plenty of cashback offers before. We might even see some waive fees or reduce them substantially.

"And I've got no doubt that we'll continue to see more special rates come in as we move along. With the RBA expected to reduce one more time this year, I think we'll see continued competition."

Is there a catch to cashback?

As tempting as the prospect of pocketing a few thousand dollars for switching loans may be, refinancers may benefit from doing a bit of due diligence before jumping in.

Stevens recommends that borrowers take a look at features beyond the cashback amount - like the interest rate and fees - which may prove more impactful from a cost perspective over the long run.

"The catch is that the 'best' deal for someone long term is often with a lender that isn't offering cashback," he says.

"In other words, you might get the upfront cash but end up paying more over time through a higher rate or less competitive product."

At the end of the day, Stevens says that cashback shouldn't be the deciding factor in opting for one loan over another.

"It can be a nice bonus if the right loan for your needs happens to come with it, but the focus should always be on finding the lender and structure that best fits your objectives."

Get stories like this in our newsletters.