In short: A refinance cashback is worth it only if the loan it comes with is also competitive on rate. On a $600,000 loan, every 0.10% of extra interest costs about $600 a year, so a $3,000 cashback on a loan priced 0.20% higher than the best alternative is gone in 30 months. Take the cashback when the rate is also sharp, and never when it is the only thing that is.
Key takeaways
- On a $600,000 loan, a 0.10% rate difference is worth about $600 a year in interest.
- Break-even on a $3,000 cashback is 12 months at a 0.50% rate gap, 30 months at 0.20%, and five years at 0.10%.
- Refinancing has real costs: discharge and government fees on the way out, possibly application and valuation fees on the way in.
- Cashback usually comes with conditions: minimum loan size, a package fee, and a requirement to keep the loan open.
- Compare the comparison rate and the total cost over your realistic holding period, not the headline cashback.
Cashback offers come and go with lender appetite, and in 2026 they are back on the menu at some banks and gone at others. They are a legitimate way to offset the cost of switching. They are also a very effective way to distract you from the rate. This post gives you the break-even maths so you can see through the marketing and decide on numbers.
What a cashback actually is
The lender pays you a lump sum, commonly $2,000 to $4,000, after your refinance settles. It exists because refinancing has friction and the lender wants to buy your inertia. Cashbacks generally require a minimum loan amount, an LVR at or below 80%, and sometimes a package with an annual fee. Some lenders claw the cashback back if you leave within a set period. Read the conditions before you count the money.
Because the lender is paying to acquire you, it often recovers the cost through a rate that is slightly above the sharpest in the market. Not always, and not with every lender, but often enough that the rate gap is the first thing to check.
The core maths on a $600,000 loan
For illustration, at 6.00% p.a. a $600,000 loan over 30 years costs about $3,597 a month. Every 0.10% on the rate changes the annual interest by roughly $600 in the early years of the loan. That gives a simple rule: the annual cost of a rate gap is the loan amount multiplied by the gap.
| Rate gap vs best alternative | Extra interest per year on $600,000 | Extra interest per month |
|---|---|---|
| 0.10% | about $600 | about $50 |
| 0.20% | about $1,200 | about $100 |
| 0.30% | about $1,800 | about $150 |
| 0.50% | about $3,000 | about $250 |
Break-even table
The break-even point is how long it takes for the extra interest to consume the cashback. After that, the cashback loan is costing you money every month.
| Cashback | 0.10% gap | 0.20% gap | 0.30% gap | 0.50% gap |
|---|---|---|---|---|
| $2,000 | 40 months | 20 months | 13 months | 8 months |
| $3,000 | 60 months | 30 months | 20 months | 12 months |
| $4,000 | 80 months | 40 months | 27 months | 16 months |
Read it like this: a $4,000 cashback on a loan 0.30% above the best rate is ahead for 27 months and behind after that. If you would realistically hold the loan for five years, you lose about $5,000 net. If you would refinance again in two years, and the lender has no clawback, you win by about $1,000 before switching costs.
Now the version that favours the cashback: the cashback loan is priced at the same rate as the best alternative, or within 0.05%. Then the cashback is close to pure gain, and the only question is whether the fees and conditions are acceptable. That does happen, particularly with lenders using cashback to chase market share, and it is the situation worth waiting for.
Do not forget the switching costs
A refinance is not free even with a cashback. Typical costs include:
- Discharge fee from your current lender.
- Government mortgage discharge and registration fees.
- Application, valuation or settlement fees with the new lender (often waived, but check).
- Package or annual fees on the new loan, which can be a few hundred dollars every year.
- Break costs if you are leaving a fixed rate, which can run to thousands. See breaking a fixed rate loan.
If switching costs total $1,000 and the cashback is $3,000, your real cashback is $2,000 and the break-even months in the table roughly shrink by a third. The refinance calculator nets all of this out and the comparison rate captures most ongoing fees in a single number.
A worked comparison
A Sunbury couple owes $600,000 on a loan now at 6.40%. Two refinance options:
- Lender A: 6.00% variable, no cashback, $250 annual package fee.
- Lender B: 6.20% variable, $3,000 cashback, $395 annual package fee.
Against their current rate, both save money. Against each other, Lender B charges 0.20% more, about $1,200 a year, plus $145 more in fees, so around $1,345 a year. The $3,000 cashback covers just over two years. If they plan to hold the loan for three years or more, Lender A wins. If they plan to sell the house within two years, Lender B wins, provided there is no clawback. Neither answer is universally right; the holding period decides it. Model it with the loan comparison calculator.
When a cashback makes sense
- The rate is competitive on its own, within 0.05% to 0.10% of the sharpest comparable loan.
- You are refinancing anyway for a structural reason: consolidating debt, releasing equity, adding an offset. See the refinancing guide and when to refinance.
- You are on a fixed or short holding horizon and there is no clawback.
- The cashback covers switching costs that would otherwise stop you leaving a poor rate.
When it does not
- The rate is 0.20% or more above the best alternative and you plan to stay for years.
- You are leaving a fixed rate and the break cost swallows the cashback.
- The offer requires a package fee that outlives the cashback.
- You would be better served by a rate review with your existing lender, which costs nothing. Many lenders will drop a loyal customer's rate on request, especially if you have a competing offer in hand.
For an official view on comparing loans, the MoneySmart switching guide is a good neutral starting point. If a lender treats you unfairly in the process, the Australian Financial Complaints Authority handles disputes at no cost.
Frequently asked questions
Is a refinance cashback taxable?
For an owner-occupied home loan the cashback is generally treated as a reduction in the cost of borrowing rather than income. For an investment loan the treatment can differ and may affect what you can deduct. Confirm the treatment for your circumstances with your accountant or the ATO.
Can I refinance just for the cashback and leave again?
Some borrowers do, and some lenders now include clawback clauses that require repayment if you discharge within a set period. Each refinance also adds an enquiry to your credit file and costs several hundred dollars in fees. Serial cashback chasing rarely beats simply holding a sharp rate. See credit scores and home loans.
Do cashbacks apply to investment loans?
Often yes, sometimes with different conditions. Investment loans usually carry a higher rate than owner-occupied loans, so the rate gap maths matters even more. Check our investment property loans page and confirm whether the cashback applies per loan or per application when you have multiple splits.
What LVR do I need to qualify?
Most cashback offers require an LVR of 80% or below, because the lender does not want to pay cashback and take on LMI risk at the same time. Check yours with the LVR calculator; if your property has grown in value since you bought, you may be under 80% without realising.
Talk to GNT Finance
We compare cashback and non-cashback loans side by side on your actual balance and holding period, so you take the offer only when it really is money in your pocket. Our best interests duty means we recommend the loan that suits you, not the one with the biggest sign-on bonus. Book a free consultation or call Gorakh Timilsina on 0426 403 703. There is no cost to you for our home-loan service in most cases.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.