Cashback Mortgages
The 'Variable' rate means either the lender's standard variable rate (SVR) or those rates which track an external rate (such as the Bank of England base rate or LIBOR) or tracker rates. 'Variable' means the rate can go up and down.
Instead of receiving a discount, you receive a single lump sum or cashback generally based on the value of your loan at the time you take out your mortgage. For example, on a £100,000 mortgage with a 3% cashback, you will receive £3,000. Your monthly payments are usually linked to a Variable rate, which may go up and down in line with interest rate changes.
Pros
It means money in your pocket at a time you may need it most. It can provide you with a very useful contribution to the cost of moving, or helping you pay for the decorating and refurbishment work you may have planned for your new home.
Cons
Because of the lump sum you receive at the start of your mortgage, your rate may not be as attractive as some other mortgage types. The cashback you receive is not usually available to use as a deposit on your mortgage, as it is only generally available after you complete.