Cash-Back Mortgages

What are Cash-Back Mortgages?

Cashback mortgages are just that.  They are mortgages in which you are given cash back to pay some debt or do renovations and so on…

Basically it is a mortgage product which allows you to get beyond the maximum loan to values allowed today on both purchases and refinancing.  I wouldn’t suggest using a cash-back mortgage for renovations as we have better products available to help you with that.

For a purchase the minimum down payment you have to come up with is 5%.  So let’s say for example you buy a house worth $400,000, the down payment would be $20,000.  There are a couple of lenders which will allow you to borrow up to all of your down payment back.  So basically you have the ability to borrow back up to $20,000 to pay off debt or do renovations and much more.

For a refinance the maximum loan to value you can go up to is 80%, with this product you have the ability to get all the way up to 85% of your properties value.  So if you refinanced a $400,000 house to $320,000, you would be able to borrow an additional $20,000 with the cash-back.  You can use the money to pay off debt and do renovations and much more.

It is important to know however that in doing so you will be forfeiting todays discounted rates.  Your rate will be higher than it would normally be otherwise.  For example let’s say with 5% down I can get you a 5 year fixed rate of 2.89%.  With the cash-back mortgage with 5% cash-back your rate would be roughly 5.14%, so a lot more expensive.

Also, the money cannot be used for the down payment of your house.  In addition to that if you pay out the mortgage before the end of the term the payout on the cash-back portion could be in full.
I would strongly recommend you get in touch with a mortgage expert (like myself) to help you determine if this product is right for you.