With a Cash-Back mortgage, you can receive up to 5% cash back towards your down payment and closing costs. This extra money can be extremely useful for first-time buyers who need to invest in home improvement items such as blinds, carpet, appliances, or even furniture. It’s no surprise that first-time buyers are the number one consumers of Cash-Back mortgages in Canada.
Is a Cash-Back Mortgage Right For Me?
- You’ve saved up enough money to purchase your home, but you’re anticipating being a little short on money after the mortgage closes. Cash-Back can act as a buffer to help get you through your first couple of months as a new home owner.
- You utilized the RRSP Home Buyer’s program and withdrew your down payment out of your RRSPs. Now you need additional money to cover legal fees and moving expenses.
- You received a gift from your family to put towards your down payment, but you could use some extra money to feel more comfortable taking on this new liability.
Through a bank, you can receive 5.5% Cash-Back at 5.24%. This Cash-Back cannot be used towards a down payment, but you might use it to pay for your land transfer taxes, lawyer’s fees, closing costs, renovations, furniture, or appliances.
Alternatively, through a credit union, you can receive 5.0% Cash-Back @ 4.85%, which you can put towards your down payment. In this way, you can essentially finance beyond the 95% LTV limit. By using the Cash-Back to help pay for your down payment, you can work around the minimum down payment of 5%. In most cases, you can access your Cash-Back funds within a few days of closing your new house.
This Cash-Back is never directly paid back to the bank provided that you continue your mortgage to the end of the negotiated term. Instead, the bank increases the interest rate on the entire mortgage to recover their costs. You would, however, need to repay the money if you decide to pay off your mortgage, transfer it, or make any significant changes to it within the first term of the mortgage (first 5 years).
To learn more about Cash-Back Mortgages you can contact us here and speak to one of our representatives.
"I went with Mortgages dot ca for my mortgage. My rate was 2.89 for 3 years, which was the best rate I could find. James was my mortgage broker and he was excellent — always quick to respond to any questions and also worked through the weekend with me to make sure we had everything submitted on time for Monday. There was a delay on TD banks’ end that caused my closing to be delayed but James contacted the VP of the bank to help get my application approved quicker. Once I secured my rate I was expecting to handed off to the bank for my application (not sure if this is standard) but instead James collected all the paper work from the bank and filled in some of it for me, circled the areas for signature etc. so it was an easy process for me. I will probably use James for my next mortgage if the rates are still competitive"− Jason Cowan