Should you take the cash?

We compare the cash-back incentive offers by the nine main banks in the mortgage market along with the conditions involved

20th Jul 14, 5:44pm by David Chaston

The mortgage market is competitive and in addition to low rate offers, many banks are now offering 'cash-back' incentives.

The table below will help you compare the current offers.

It is only a comparison focusing on the 'cash-back' aspect - there may be other features that suit you better.

And of course, the lowest overall cost (including interest rate cost) will be a factor you should assess when you look at the cash-back enticements.

Cash-back offers are attention-grabbers. Banks are not charities so the cost of incentives to them may need to be made up in other ways.

Therefore it is important to check all the other costs and 'terms and conditions' before you enter into any formal commitment.

A professional mortgage broker can be helpful if you find the process confusing. Often mortgage brokers can negotiate harder than you might feel comfortable doing. But is important to find someone you can trust to do this work for you.

Remember, the size of the overall banking business you can bring will be important to any bank. Even more so will be the 'quality' of your financial situation.

Most of the cash back offers require you to have at least 20% equity in your home, but not all of them do (see BNZ).

Many require you to sign up to other banking products - just be sure you really need those, otherwise the value of the cash incentive is eroded quickly if you take on unnecessary costs.

Other fees and charges may apply that are not listed below. You should ask for a full list.

If you have negotiated a better deal than these advertised offers, feel free to describe what you 'won' in the comment section below.

A final thought; it is almost certain the the best long-term use of any cash incentive is to use it to reduce the amount owned on your loan. See this story for more on this and how you can work that out.

This summary was prepared as at 7am, Monday, July 21, 2014.

Note the various expiry dates of offers.

Lender	Cash incentive	Other incentives	Conditions

	$3,000 for new lending of $250,000+ $1,500 for new lending of $100,000+ (offer ends August 31, 2014 drawdown by Sep 30, 2014)	Chance to win repayments for one year (offer ends July 31, 2014) 0% balance transfer with zero fees for credit card for one year No monthly account fees if you have an ANZ Freedom account	~~20% deposit minimum~~ ~~Salary/wages paid into an ANZ transaction account~~ ~~You must get a new credit card or insurance product~~ Detail
	$3,000 for new lending of $250,000+ (offer ends August 31, 2014 drawdown by Oct 30, 2014)		20% deposit minimum Salary/wages paid into an ASB transaction account for at least 2 years Detail
	$3,000 for new lending of $250,000+ $2,000 for new lending of $100,000+ (offer ends August 1, 2014) drawdown by Sep 12, 2014)	Low deposit is ok to qualify	Salary/wages paid into an BNZ transaction account for at least 2 years You need to commit to one other new BNZ product Detail
Kiwibank	$2,000 for new lending of $100,000+	Fee tree transaction account a six year guarantee that mortgage cost will be lower than 'any other bank with nationwide branches'	Detail
	(none)		Detail

Co-op Bank	(none)	$1,000 towards 'legal and admin costs'	Detail
	(none)	Market leading Premier Special interest rates	Detail
	$3,000 for new lending of $250,000+ "and certain fixed terms" Must drawdown in 90 days	'No application fees' Market leading interest rates	20% deposit minimum Salary/wages paid into an SBS transaction account You must get a new 'qualified' product Detail
TSB Bank	$2,000 for new lending of $200,000+ $1,000 for new lending of $100,000+	'Existing clients may qualify if you have a loan of $100,000+' A market-leading two year special interest rate	20% deposit minimum Salary/wages paid into an TSB Bank transaction account You must get either a new credit card + general insurance + term insurance, OR have your KiwiSaver in a TSB plan Detail

See all banks' carded, or advertised, home loan rates here.

Here are some current mortgage rates as at 7:00 am on Monday, July 21, 2014:

below 80% LVR	1 yr	18 mths	2 yrs	3 yrs	5 yrs

	6.05%	6.25%	6.09%	6.65%	7.15%
	5.95%	6.30%	6.40%	6.65%	6.99%
	5.99%	6.25%	6.39%	6.25%	6.99%
Kiwibank	5.99%		6.29%	6.29%	6.95%
	5.95%	6.30%	6.39%	6.65%	6.99%

Co-op Bank	6.00%	6.00%	6.00%	6.25%	6.89%
	5.85%		5.85%	5.85%	6.99%
	5.85%	5.99%	6.20%	5.95%	6.79%
TSB Bank	6.00%	6.05%	5.80%	6.60%	7.00%

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Mortgage choices involve making a significant financial decision so it often pays to get professional advice. A Roost mortgage broker can be contacted by following this link »
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Fixed mortgage rates

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Source: interest.co.nz

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16 Comments

by MortgageBelt | 20th Jul 14, 6:04pm 1405836248

These incentives give a mortgage holder good leverage to ask for a better rate at their current bank. Keep an eye out for decreased interest rates for some fixed terms est 6 month, 1 year, 2 year.

It may pay not to fix for too long given the uncertainty globally & in NZ, We may well be seeing lower rates as a necessary reaction.

by trexjr | 21st Jul 14, 7:57am 1405886254

These 'cash back' offers would be counted as income wouldn't they. So therefore taxable?

by Zoltuger | 21st Jul 14, 9:07am 1405890476

Unlikely to be taxable. Unless you're getting cash incentives on a regular basis - maybe as a property investor

by David Chaston | 21st Jul 14, 10:52am 1405896720

We asked a couple of people about this, including Terry Baucher and this is what he had to say:

"It’s a good question to which the short answer is: “It depends”. I would consider the incentive taxable if it arises as a result of lending related to deriving income, such as residential rental income, or perhaps using in a business. If it is a purely private mortgage then I don’t believe it would be taxable under ordinary rules and it does not seem to be covered by any specific provision of the Income Tax Act 2007."

"Incidentally, where the mortgage does relate to deriving income then the legal costs relating to that mortgage should be deductible under section DB 5 of the Income Tax Act."

"Like a lot of seemingly innocuous questions, there’s quite a bit to it."

by David Chaston | 21st Jul 14, 4:14pm 1405916059

We also asked the media team at the IRD. This is what they said:

"In a purely private mortgage arrangement it is unlikely the cash back offer would amount to income. However, this may not be the case when the borrowing is undertaken for business purposes."

"Without seeing all the documents pertaining to the arrangements, we are unable to comment on what the tax consequences would be regarding to where the mortgage relates to a business arrangement. For example, the purchase of an investment property."

"We would suggest that if banks want to provide certainty as to the tax consequences of the inducements / incentive payments then the banks may wish to apply for a binding ruling."

by cowboy | 21st Jul 14, 8:46pm 1405932397

Did you get them to explain _why_ it wouldn't be income in private arrangement?

Clearly it's money paid and received.

It's clearly not a gift, as it's not without conditions. One must apply and qualify certain criteria to receive the cash, and no special relationship exists for the bank to be giving a gift. Otherwise scholarships (which are income) coudl be arranged as gifting (but the lack of special relationship precludes such an approach...normally)

It's not a prize, since there's not skill requirement, and it's for every qualifier.

Looking at the paperwork, it could be an advance from the loan, then it would be tax free.

But if it's a rebate of interest, that's income. Or if it's cash payment, then thats income as well.

But the only two conditions I know of is if it's a bonefide gift, or if it's a loan. And if it's a loan, then relief from interest IS considered income (as well described under the Trust legislation).

Either way I find it hard to understand why it wouldn't be income for a individual, and yet would be income for a business. Which points to it being rebated interest.

That they use binding rulings for such cases shows that things at IRD are on the decay. A binding ruling would be a patch over, trying to legislate for a particular occurence - that's how you end up with spaghetti legislation.

They need to strip down the banks offer to find out what it is... given the interest rates, and the link to value of loan, it's likely to be a rebate on interest paid in advance. (ie they hope you don't pay the bonus back, so you pay the higher interest for longer, without feeling so bad about being charged "special promotions cost overheads" on your loan.) As such I would expect the rebated interest to be taxed (as natural born citizens don't get tax relief for interest, thus a rebate doesn't increase DR, increase profit.)

by trexjr | 22nd Jul 14, 10:49am 1405982976

I've had a couple of these 'incentives now'. Before I recieved the last one I specifically asked my loan manager if it would be necessary to declare it as income as paying tax on that amount would have been the difference between this loan and a lower interest one offered at another bank. After checking he said no I didn't need to. I own investment property secured over personal home. So there's another grey area.

Interestingly there's no mention of these 'incentives' in any documentation. It just magically appears in your account a few days after the loan is drawn down...

If I have to pay tax on it fair enough. I'll be a bit peeved after being told I don't have to but oh well. Though if so, I too see little distinction betweeen whether the loan is personal or business. If it's classed as income, it should be taxable for everyone surely...

by cowboy | 22nd Jul 14, 11:19am 1405984797

If it magically appears, then it's income and taxable.

Your loan manager is not qualified to make a declaration either way, and also is only operating as an intermediary between you and the banks expert team, as such _anything_ they say is non-binding (that's usually in the fine print somewhere too). All that counts is the banks offical declarations which are laid out in the written documentation (which is why when you need to change or query anything it has to go back to the expert team for review.)

As a front person for the bank the loan officer is extended very limited powers of negotiation but it's your job to ensure everything they claim is written down or it's taken as "sales hype".

Note: I am not certified or qualified to give any kind of advice. Use at your own risk. Don't believe anything writeen on the internet with out bribing a licensed professional first.

by xingmowang | 21st Jul 14, 10:41am 1405896097

Any incentive offered to existing mortgate from any bank?

Any incentive offered to switch between banks?

by Taxman | 21st Jul 14, 12:12pm 1405901575

Both BNZ and ASB terms are incorrect. Both require the mortgage facility to be retained for a minimum of 2 years.

BNZ:

"conditional on home loan remaining with BNZ for at least two years"

ASB:

is conditional on you maintaining your banking relationship (your main transaction account with your salary/wages credited and your loan facility/facilities) with ASB for at least two years from draw down and providing ASB with new security.

by David Chaston | 21st Jul 14, 1:44pm 1405907095

Happy to correct/update any errors, but I am unclear why you say ASB and BNZ are incorrectly listed. Our table clearly states the 2 year requirement for both banks. Can you please elaborate ...

by Taxman | 21st Jul 14, 3:03pm 1405911797

Your BNZ entry says:

"Salary/wages paid into an BNZ transaction account for at least 2 years"

It is actually possible to have a mortgage without having salary/wages paid into a transaction account. Or am I missing something else?

by TimfromTaupo | 21st Jul 14, 8:15pm 1405930536

Obviously they want your income credited to THEIR account not just any bank account.

by Taxman | 22nd Jul 14, 9:24am 1405977850

Of course that was not what I meant. Do I have to spell it out for you? Transfer mortgage and transaction account to BNZ. Collect $3,000. Wait 6 months and transfer mortgage but retain transaction account with BNZ. Hence the wording on this table is wrong, and it does not even match the wording on the BNZ site. Why didn't David just copy the wording as it was instead of coming up with his own version.

by Zoltuger | 21st Jul 14, 3:45pm 1405914342

Do the incentives replace any legal fee contributions? Legal fees can be $1500 on their own.

by dtcarter | 22nd Jul 14, 10:25am 1405981508

What would be interesting, is a table, or even better a calculator, showing the implied interest rate including the cashback.

This would assume the cashback money you spend on whiteware or whatever, is money you no longer need to spend from your income, so can now go on the mortgage instead. I hate these gimmicky cash-back, hey if you pay us $400,000 over 20 years then we'll give you $2000 now offers. Makes it so much harder to compare rates between the banks.