Cashback mortgages pay the borrower a lump sum — sometimes a flat dollar amount, sometimes a percentage of the mortgage — at closing, as an incentive to choose that lender. In exchange, the client typically accepts a somewhat higher interest rate than they'd get on an equivalent mortgage without the incentive; the lender is effectively financing the upfront cash payment through a small rate premium collected over the term.
Most cashback products include a clawback provision: if the mortgage is broken, discharged, or switched to another lender before an agreed point in the term, some or all of the original cashback amount has to be repaid to the lender. This is separate from, and in addition to, whatever standard prepayment penalty applies under Module 01's formulas — a client breaking a cashback mortgage early can owe both the IRD or three-months'-interest penalty and a clawback repayment, not one or the other.
A break that looks manageable when a client only asks about “the penalty” can look very different once the clawback is added back in. A client who received $3,000 in cashback and is now facing what seems like an affordable penalty may be surprised to learn a portion or all of that $3,000 has to be repaid on top of it — turning a decision that looked close to break-even into one that clearly isn't, or vice versa. This is exactly the kind of number that needs to be in the conversation from the start, not discovered on the payout statement.
Clawback structures vary meaningfully across lenders and products — some prorate the repayment down over the term so less is owed the further along the client is, while others use a flatter structure where the full amount is owed if the mortgage breaks within an early window, regardless of exactly when. Because these structures are set by individual lenders and change over time, this course teaches the pattern rather than asserting any specific lender's current formula as fact. The one universal habit that matters: get the actual clawback schedule for the specific product in writing before advising a client on the real cost of breaking it.
When a break does happen, the clawback typically appears as its own line item on the payout statement discussed in Treadstone's transfers, switches and renewals course — distinct from the principal balance, accrued interest, discharge fee, and any prepayment penalty. Reviewing a payout statement line by line, rather than skimming for a single total, is what catches a clawback that a client may not have remembered accepting years earlier.
A client received $3,000 in cashback 18 months into a 5-year cashback mortgage and now wants to break it. What should the broker do first?
Clawback formulas genuinely differ by lender and product — there is no single standard proration reliable enough to assume, which is exactly why this module emphasizes getting the actual written schedule rather than estimating. Treating the cashback as irrelevant once it's been paid out ignores that it very often has to be repaid, in whole or in part, on top of the standard penalty — and the trigger is typically breaking the mortgage early for any reason, not specifically switching to a competing lender.
The intro and first module are free to read. Add your name and email once and the rest of this course opens — along with every other course on the site. No card, no trial.
Already unlocked on another device?
