What is a Cash Back Mortgage and Why You May Want to Consider It
With so many choices for borrowers out there today, it can be hard to decide what best suits your needs. There are a lot of good mortgage options out there, but if you’re looking for a mortgage that will help you pay for renovations or help with some debt, one great option you might want to consider is a cashback mortgage.
What is a Cash Back Mortgage?
A cashback mortgage is just like it sounds. When you get a mortgage, some lenders will give you cashback upon funding. This is typically between 1 to 3% of the full mortgage amount.
Cashback mortgages come as a 5-year fixed-rate mortgage. They’re available for purchases, or if you’re transferring between lenders. The extra cash can be used for whatever you want, from paying a penalty to making some upgrades to your home!
Who is Eligible?
Like most mortgages, eligibility for a cashback mortgage is based on your credit score, whether, whether or not you have a steady income, and your debt-to-income ratio. Thinking about exploring a cashback mortgage? Talk to one of our experienced brokers at Mortgage Design Group Inc. and learn if you qualify!
What Should I Be Aware Of?
Cashback mortgages carry a slightly higher rate than standard mortgages. For example, currently, a 1% cashback mortgage for 5 years has a fixed interest rate of 2.29%. A standard 5-year fixed mortgage is 2.09%. (Interest rates are all subject to change.)
While you’re free to use the extra cash for whatever you need, it’s important to note that the cash from this rebate cannot be used as part of a down payment.
Note that if a cashback mortgage is broken, there are additional penalties for the cash rebate. This amount is based on a sliding scale and is decided depending on when you decide to break the mortgage. The further into your term you are, the smaller the penalty!
Why Get a Cash Back Mortgage?
With a 5-year fixed term, a cashback mortgage can provide a buyer—especially a first-time homebuyer—with more possibilities. For example, you could put the money towards furnishing your home or making upgrades around the house. You could also use the funds to pay out a smaller personal debt, which could help you qualify for a larger mortgage amount!
Cashback mortgages are a great alternative for someone who is looking for a little bit of flexibility in the present. While we still do recommend considering all mortgage options, you can still take advantage of the current low-interest rates! Better yet, the money you get back is tax-free!
What to Do If You Have Questions?
At Mortgage Design Group Inc., we know there’s no such thing as a dumb question. If you’re looking for answers, we’re more than happy to guide you through the entire mortgage process and all your mortgage options!
With a quick response time and a free world-class experience, we want to make mortgages easy and accessible to everyone. Find a trusted partner in one of our brokers today and sit down for a conversation today—all from the comfort of your own home!