Cashback Clawback: What You Repay if You Leave Your Lender Early

What clawback is

When a lender pays you a cash contribution for bringing your home loan to it, the loan agreement includes a condition: stay for a minimum period or repay the money. That's the clawback. Lenders do it because the contribution is an upfront cost they expect to earn back over several years.

How long, and how much

Both depend on your agreement, and you should read yours. Typical terms we see:

• A clawback period of three or four years from the date the loan was drawn.
• Either the full amount repayable throughout, or a pro-rata amount that falls as time passes.
• The same condition applied to contributions paid towards your legal fees.

As an illustration, take a $5,000 contribution with a three-year pro-rata clause. Leave after two years and you'd repay about a third, roughly $1,667. Under a full-repayment clause you'd repay all $5,000 right up to the last day. The difference is worth knowing before you sign.

What triggers it

Refinancing to another lender is the obvious trigger. Some agreements are also triggered by:

• Selling the property and repaying the loan without taking a new loan with the same lender.
• Repaying a large part of the loan early.
• Sometimes, moving your main banking or salary elsewhere, if that was a condition of the offer.

If you're selling and buying again, ask your lender about keeping the lending with them for the next purchase. Most will carry the arrangement over, which avoids the clawback.

Where to find your terms

Look at the loan agreement or letter of offer from when the money was paid, under headings such as 'cash contribution', 'incentive' or 'special conditions'. If you can't find it, your lender can tell you the amount repayable on a given date. Ask in writing so there's no doubt.

Clawback isn't a break fee

They're separate. A break fee relates to leaving a fixed interest rate early. Clawback relates to leaving the lender. You can owe one, both or neither. A refinance timed for the end of a fixed term avoids the break fee but not the clawback, if you're still inside the period.

This article explains how New Zealand lenders generally assess these situations. It is general information, not personalised financial advice, and lender policy changes often — check your own position with a registered adviser. Official sources: Reserve Bank of New Zealand for lending policy and the OCR, and Sorted.org.nz for independent government-backed money guidance.