New cashback site helps you pay off your mortgage more quickly: should you sign up?

A new cashback website overpays your mortgage when you spend money with high-street retailers.

Accelerate My Mortgage (AMM) offers cashback on spending with dozens of shops, which is then paid directly to your mortgage lender, helping you pay off your loan more quickly.

So what’s the catch? Here, we investigate how AMM works and offer advice on whether the rewards justify linking your mortgage to the cashback website.

Cashback with a twist

AMM is like other popular cashback websites, but with one key difference.

It works like this: you search for a participating retailer on the AMM website and click through to buy something. You’ll then earn a percentage of what you’ve spent as cashback.

But instead of getting the cash, AMM keeps your earnings in a fund and then pays it to your mortgage lender as an overpayment once your pot hits £50.

Which retailers are taking part?

AMM lists 33 participating retailers on its website, including major high-street names such as John Lewis, Marks and Spencer, and Waterstones.

How much cashback you’ll receive varies by retailer, and it’s not always clear exactly what you’ll get.

When you click on a retailer for further details on the AMM website, you’re taken through to its page on a website called Awin – which describes itself as a ‘global affiliate marketing network’.

The terms and conditions for some retailers here are complicated at best, and some don’t mention cashback at all.

Vodafone’s entry, for example, encourages you to click the ‘commission’ tab for more information – but when you do you just get a blank page.

In the table below, we’ve listed the cashback percentages offered by participating retailers as of Thursday 27 February 2020.

How much cashback will I earn?

Let’s use John Lewis as an example. The department store offers different cashback levels depending on what you buy, from electricals (2.5%) to men’s fashion (7%).

If you buy a sofa from John Lewis for £1,000, you’ll benefit from cashback of 5% if you go through AMM – that’s an extra £50 towards your mortgage.

How does the process work?

For your cashback to go towards your home loan, you’ll need to give AMM permission to make payments directly to your mortgage account.

If your lender doesn’t allow third-party payments or sets a minimum amount you can overpay in one go, it’s possible to be paid the money by AMM directly so you can overpay the loan yourself.

And as we mentioned earlier, the payment will only be made to your lender once your cashback balance hits £50.

What’s in it for AMM?

AMM is free to use, but you will need to share details about your mortgage.

The business is run by a mortgage broker called RateSwitch, which is regulated by the Financial Conduct Authority.

When you register, you’ll provide details of your current mortgage, including when any fixed introductory term ends.

RateSwitch says it will then ‘continually track your mortgage’, sending you a monthly round-up of the best deals and ‘alerting you when it’s time to switch to a better rate’.

In other words, in exchange for your details, it’ll encourage you to use its service to remortgage. This service is fee-free and you’re under no obligation to use it.

RateSwitch makes money from lenders, who pay a commission when you switch.

Should you use AMM?

AMM offers an innovative way of shaving some months of your mortgage, but its cashback structure means it could take a long time to make any significant difference.

Some of the retailers involved only offer cashback of 1%, and some only allow cashback on purchases from selected departments.

With this in mind, the cashback could be a boost if you’re looking to buy big-ticket items from the participating retailers, and are willing to share your mortgage details with RateSwitch.

If you’re only likely to be an occasional spender or have no interest in using a broker to monitor your mortgage, you’re likely to find AMM of limited use.

Why should you overpay your mortgage?

With many buyers facing affordability issues, lenders have begun to offer increasingly longer mortgage terms of 30 or even 35 years.

But while a longer term means lower monthly repayments, it also means it’ll take longer – and ultimately cost you more – to pay off the mortgage.

Right now, mortgage rates are very low across the board, so it’s a great time to consider overpaying if you can.

Even overpaying by small amounts you could knock off months – or even years – from your term.

For example, if you’ve got £200,000 outstanding on a 25-year mortgage at 3%, an overpayment of £90 a month could see you pay off your loan three years early and save more than £11,000 in interest.

You can use our mortgage overpayment calculator to see how much extra payments on your loan can help you pay it off more quickly.

Do all mortgages allow overpayments?

The vast majority of mortgages allow you to make overpayments, either as a monthly or annual lump sum, or on an ad-hoc basis.

Lenders do set limits, however. The most common rule is that you can only overpay a maximum of 10% of the outstanding balance each year.

It’s worth speaking to your lender or looking at your mortgage agreement to see which rules apply.

• Find out more: how do mortgage payments work?

from Which? News https://www.which.co.uk/news/2020/02/new-cashback-site-helps-you-pay-off-your-mortgage-more-quickly-should-you-sign-up/
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