Overview of a Cash Back Mortgage

Receive up to 5% cash back of the amount of mortgage borrowed.  Cannot be used towards your down payment.

Reasons to Consider a Cash Back Mortgage

When purchasing a new home all the costs add up and can be overwhelming and at some point in time unmanageable, especially for first time home owners. On top of the large savings for a down payment of 5% or more there are also other costs to closing the purchase and moving in.  With getting a little cash back after your purchase closes this could allow you to pay for general hooks up cost for hydro, electrical, internet etc. or just provide additional cash to purchase some new furnishings or home décor.

Although you will receive a lump sum of cash after your mortgage closes, this may only benefit you in the short term as there are some things to consider before signing on the solid black line;

  • In most cases the rate for this type of mortgage may be typically higher than a standard mortgage rate. You will likely pay an interest premium throughout your mortgage term that could be higher than the original lump sum you received.
  • Should you refinance or payout this mortgage early the lender will claw back a portion of the cash that they had paid to you when your mortgage initially funded.  This claw back will be added onto any prepayment penalty you may have to pay at that time.
  • This mortgage is not available as a variable rate mortgage, the stipulations are on a mortgage with a fixed rate and a term of three years or more.

Disadvantages of a Cash Back Mortgage

Although you will receive a lump sum of cash after your mortgage closes and it will benefit you in the short term, there are some things to consder before signing the solid black line;

  • The rates for this type of mortgage are typically higher than a standard mortgage rate. You will likely pay an interest premium throughout your mortgage term that could be higher than the original lump sum you received.
  • Penalties are incurred if you refinance, transfer, or renew your mortgage before maturity (in addition to the regular refinancing penalties).
  • Breaking your mortgage early could cost you the amount or a portion of the cash you received
  • This mortgage is not available as a variable rate mortgage, the stipulations are on a mortgage with a fixed rate and a term of three years or more.
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