Cash Back Mortgage

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Some deals aren't as good as they might seem

If you need help with moving fees or want to redecorate your new home, a cash back mortgage sounds ideal: in addition to paying for your home, the lender will also give you a wad of cash to spend as you see fit. However, you don't get something for nothing.

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Considering a cash back mortgage? It's not always a good idea. While the thought of a few hundred or thousand pounds in your hand when your mortgage has been processed might sound attractive, a cash back mortgage could cost you more than non-cash back products.

Different lenders have different rules, but with most firms a cash back mortgage comes with a long "lock-in" period, usually five or six years. Move your mortgage during that period and the penalty charges will be massive. You'll often find that cash back mortgage products tend to have slightly higher APRs, too: when you consider that the difference in interest will apply over the entire term of your mortgage, the extra cost will massively outweigh the cash back amount.

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