A Scarborough Private Mortgage can be put into place through one of our private mortgage lenders on property zoned residential, commercial, or industrial.
A common request for a Scarborough private mortgage tends to relate to mortgage refinancing or debt debt consolidation where the applicant is trying to leverage the equity in their property.
But there are many, many scenarios where a private mortgage could be put into place through our lending partners.
While there are a lot of situations where bad or distressed credit may bring someone to private mortgage financing, this doesn’t have to be the case, and in many instances, private mortgage loans can be preferred over bank or institutional mortgage financing alternatives.
For instance, any time a Scarborough property acquisition transaction needs to be completed in less than 10 business days, the only realistic option to get funding in place can be a Scarborough private mortgage.
Yes, on residential properties, it can be possible for a bank or institutional lender to get something approved, closed, and funded in two weeks, but its hard to rely or depend on that happening due to the amount of people that are typically involved in a institutional mortgage transaction.
With a Scarborough private mortgage financing request, if all the loan requirements are in order, a private mortgage lender that services the area and has a focus on faster turnaround time with their lawyer and mortgage broker is going to be much more likely to be able to meet the required timeline.
With commercial mortgage financing, the process can take at least 30 to 60 days to complete provided there aren’t any unexpected delays in the application process.
A Scarborough private mortgage can be a good first step in getting a commercial mortgage in place in less time, which will in turn provide the time necessary to explore and secure a longer term bank or institutional commercial mortgage solution.
Construction financing in many cases is preferred from private lending sources due to once again to the speed of getting funding in place as well as the higher average level of predictability in the draw management process that is associated with private construction loans.
And for lower loan to value requirements on solid real estate properties, the Scarborough private mortgage funding rates can come close to what some banks and institutional lenders would be prepared to offer on the same property.
So regardless of your situation, if you’d like to explore your Scarborough private mortgage options more thoroughly, I recommend that you give me a call so we can go through your requirements together and discuss different avenues for private mortgage financing available to you.
Foreclosure property financing of a property you own that is presently in foreclosure with one or more of the existing mortgage holder(s) can be accomplished through a private mortgage lender, but there are some things you need to consider to be successful with this activity.
When a borrower is in a default status on their mortgage and the lender is taking a foreclosure action, an equity mortgage through a private mortgage lender is definitely a potential option, provided that there is sufficient equity in the property to support a new private mortgage financing decision in the borrower’s favor.
Its unlikely that a bank or institutional lender will be interested as they typically have tighter cash flow and credit requirements than a private lender which is why an equity mortgage is the most likely option.
For instance, if the current market value of the property is $400,000 and a private lender is comfortable issuing a mortgage commitment for 60% of that value, or $240,000, then the question is can this amount of money, and your available cash allow you to retain the property through a mortgage financing action?
First, and most straight forward, you payout the existing mortgage holder or holders with the funds provided by a private mortgage holder plus cash if more funds are required than what a private mortgage lender will provide.
Under this scenario, the mortgage lender is paid out, and the foreclosure action is stopped. You would then have a private mortgage in place with a term of one to two years at the most, providing you time to either improve your financial position so that you could qualify for a lower cost, longer term bank or institutional mortgage before the end of the private mortgage term, or take the time required to sell the property for maximum market value in order to preserve your equity.
Second, you could get the private mortgage lender to buy the existing mortgage that has put the property in foreclosure either for the face amount owing or a discounted price. Private lenders are more interested in this type of scenario if they can purchase the mortgage at a discount which increases their return on investment during the time remaining on the mortgage.
In both of these cases, the lending decision is based on the equity in the property, likely established by a third party appraiser.
When a borrower in foreclosure is looking to purchase the property out of foreclosure for a bid lower than market price, the financing equation can change quite a bit.
For instance, if you were successful in buying the property out of foreclosure for a winning bid of $300,000, instead of the fair market value estimate of $400,000, you have essentially been able to acquire the property at a below market price.
But, from a financing point of view, virtually all lenders will look at any sale, regardless of the circumstances, as the current value of the property. The logic holds that if the property was truly worth more, someone else would have been willing to pay more than what you did to get the property back from the lender.
So at a purchase price of $300,000, the lender’s 60% loan to value criteria now puts the maximum mortgage at $180,000 which may or may not work for you.
The key here is to make sure that you have equity to finance, otherwise you may not have sufficient leverage available to stop the foreclosure process.
A commercial business mortgage has two different aspects that need to be defined to understand what exactly it is.
First of all, a commercial mortgage is a mortgage financing facility provided against a real estate property that is zoned for commercial use. Put another way, all properties that are not residential have some form of commercial or industrial zoning classification.
A commercial property can be owned by an individual or a company.
When the owner is a company, the mortgage effectively becomes a commercial business mortgage.
There are basically three different commercial property scenarios where lenders will be asked to provide a commercial mortgage: 1) commercial rental property; 2) owner occupied commercial property; 3) a combination of owner occupied and third party rental or lease.
Under each of these scenarios a commercial lender is going to review the financial statements of the business, the business credit, and the collateral offered as security.
There can be significant deviations in credit criteria from one type of property to another and from one region to another.
Because of the commercial use the takes place on these properties, and the larger investment dollars that can be associated with the average commercial property compared to the average residential property, a commercial mortgage lender is typically going to require considerable third party verification of key assessment items before being able to commit and fund any financing request.
The most common third party verifications include a commercial appraisal from an AACI certified appraiser, an environmental assessment from a recognized environmental consulting company, and accountant prepared financial statements with varying review levels depending on the size of the commercial business mortgage.
A commercial business mortgage can be used to acquire a property, consolidate debt, refinance and existing mortgage, fund a construction project, or provide incremental working capital to the business entity.
Because of the additional assessment work required for a business type mortgage, the lending process through a bank or institutional lender will typically take from 60 to 90 days, with private mortgage lenders falling more into the thirty day range, provided that any required information is readily available.
If you’re in need of a commercial business mortgage and would like to find out more about your options, your next step should be to work with an experienced commercial mortgage broker who can properly assess your situation and provide you with relevant commercial mortgage options for your consideration.
When talking about alternative mortgage options, I’m referring to any mortgage financing scenario that does not qualify for primary bank or “A” institutional mortgage programs.
For borrowers that fall into this classification, I would further divide them into two groups…those that miss qualifying by a lot and those that miss by a little.
For the near misses, its typically some combination of credit score and debt servicing that cause the application to fall under the line of acceptable lending criteria.
In these situations, a period of time from one to two years may be all that’s required to give them the opportunity to improve upon the areas that resulted in an “A” lender decline.
For individuals that miss qualifying by a lot, more time is typically going to be required to get their financing and credit profile to an acceptable level for lower cost mortgage interest rates.
Regardless of how or why an applicant gets declined by an “A” mortgage lender, the next step is to move into alternative mortgage options, or the sub prime lending space.
Alternative mortgage options include both institutional and private mortgage lending solutions.
With the current strength continuing in the Canadian real estate market in general, there are more sub prime options popping up post recession, providing more alternative mortgage options to both home owners and commercial property owners.
In addition to more alternative mortgage lenders existing in the market, we are also seeing more flexibility within some of the sub prime lending programs.
This is due mostly to institutional sub prime lenders wanting to hold onto their customers longer, either within the alternative lending space, or moving them into their own “A” credit products.
In many situations, the Alternative institutional mortgage options can be priced very similar to private mortgages with potentially tougher prepayment terms in the event that the borrower can the ability to move to an “A” lending product before the end of the mortgage term.
So for a borrower that is confident that they only need one or two years at the most to repair their credit to a satisfactory level, they may be better off going with a straight private mortgage that may even provide an open repayment option after so many months of the interest term have gone by.
One of the ways some the institutional alternative lenders are dealing with this is to provide adjustable rate mortgages with three to five year mortgage terms where the borrower can lock in their rate to a fixed rate in the future and benefit from better rates if they are able to improve upon their credit score during the mortgage term.
The good news for borrowers is that there are a number of different options to choose from, and depending on your situation and strategy for getting back to the “A” lending market, certain alternative mortgage options are going to be more appropriate for you than others.
The best way to figure out which option to select is to work with an experienced mortgage broker who can work through all the different potential scenarios with you.
Sometimes the best private mortgage interest rates can be the best rate available from any lending source.
Of course, this is not typical, but there are cases where you may be pleasantly surprised as to the type of private mortgage lending rates that are out there.
For much of the private mortgage lending market, a first mortgage can be priced in the 8% to 11% range. This reflects not only the risk associated with the mortgage being financed, but also the lender’s desired return on investment.
And because someone requiring private money right away may not be able to fully understand or have time to explore the market, they can end up paying a rate that is really higher than the underlying risk of the mortgage.
There is also a small slice of the market where individuals or groups of investors are looking to place private mortgages as an investment vehicle, and have extremely low risk lending criteria.
These individuals or groups are looking to do better than the returns from GIC’s, T bills, and bonds, but without taking unnecessary risk.
The solution for at least part of their portfolio is funding low risk private mortgages.
So for these low risk mortgages, how low can the interest rate go?
In scenarios where you have an excellent property in a very strong market and don’t require more than 50% loan to value, the private mortgage interest rate can get as low as 5% to 6%, with or without a lender fee on closing.
These are really terrific rates and for those lower risk scenarios, this type of money does exist.
But to gain access to it, you have to have enough patience to go through a more conservative assessment and decision making process than what you will find with most private lenders. Lower cost money is lower risk, which almost always moves slower as the decision makers for funding want to make sure that the risk level meets their criteria.
The other challenge with locating and securing the best private mortgage rates is that these specific private lenders are not all that easy to find as they don’t tend to have their own retail presence and in some cases do not even speak directly to the end borrowers.
The access to the lower rate and lower risk lenders is typically through an experienced private mortgage broker who they trust to bring them well qualified deals that meet their lending and funding requirements.
If you have a financing scenario that fits the lending criteria mentioned above and you’d like to explore seeing if you can qualify for a low private mortgage lending rate, then please give me a call so we can go over your requirements together and discuss potential funding solutions that may be available to you.
Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh
A hard money loan in Toronto or any where else for that matter refers to (in most cases) an equity based real estate mortgage that is funded from a private mortgage lending source.
The are likely different explanations as to where the term hard money loan came from, but the way I explain it is that because a mortgage is being issued primarily on the basis of equity where the borrower has some combination of strained cash flow and/or credit rating, a private lender is going to act on any lending defaults very quickly because of the risk to them associated with payment defaults.
The comparison would be to a bank or institutional mortgage, where default in payments will still be responded to and dealt with, but potentially not as swiftly as may be the case with a private lender.
In reality, this makes good sense in that the private lender is already providing financing in situation where a certain amount of financial and/or credit distress exists in most cases. Therefore, the need to follow up on any default of payments or any failure to meet terms of the mortgage quickly, is going to be important to make sure the lender can recover their capital.
Hard money doesn’t mean that some rough looking customer in the image of a loan shark is going to break you leg if you don’t make a payment, at least it doesn’t in my world. Private lenders are secured by real estate and as such have legal rights to realize on their security in the event that a borrower does not make their required payments. There’s nothing really hard about it.
That being said, there are degrees of private mortgage lending and hard money loans.
For instance, the more distressed the borrower’s financial and credit profile, the lower the loan to value a private lender is going to advance and the more closely they are going to be watching the account for any problems with repayment.
But like any other mortgage commitment from any other type of lender, the borrower is required to meet the terms of the mortgage as is the lender. Any breach of terms will likely result on action being taken by one side or the other.
A hard money loan is not difficult to secure if you know where to find the private lending sources that would be interested in your financing request.
The challenge or hard part is that most private lenders do not have their own retail presence and many don’t ever even meet with the borrowers.
In order to locate a suitable source of hard money loans, you need to be working through an experienced private mortgage broker that has access to private lenders that funds mortgages in your area.
If you need a hard money loan or would like to know more about them, please give me a call and we’ll go over everything together.
Click Here To Speak With Toronto Mortgage Broker Joe Walsh For More Information On
Hard Money Loans
Most of the time, a borrower will prepay their mortgage through a refinancing process to get a better interest rate.
But there can be other reasons whereby someone has come into additional funds and wants to use all or part of their incremental cash flow to pay down the mortgage balance.
Regardless of the reason, the first thing you need to do before providing funds to your mortgage lender with instructions to apply an amount to the principal balance outstanding is to understand exactly what the costs are going to be to do so.
If you have an open mortgage with a variable interest rate, there is likely not going to be any type of prepayment penalty.
But if you have a fixed interest rate mortgage, you may have to pay a prepayment penalty unless prepayment privileges are provided for in your mortgage commitment and you are staying within the limits of these privileges.
The basic rules around prepayment penalties on fixed rate mortgages is that you will have to pay the greater of interest differential or 3 months interest.
Interest differential is basically the difference in rate between what the lender provided to you when the mortgage was written and what the lender could lend out in the market today, multiplied by the remaining principal and time left on the interest term.
For an example of basic prepayment penalty calculator, here is one you can refer to by clicking the following link … http://www.canadianmortgagetrends.com/canadian_mortgage_trends/interest-rate-differential-ird.html
But the challenge with any type of calculator such as the one provided in the link above, is that they are based on one set of assumptions.
Each mortgage lender can have their own unique twists as to what goes into a prepayment calculation for any particular mortgage.
As a result, there can be large differences between what you THINK the prepayment penalty is based on your own math and what the lender actually calculates it out to be.
This why its important that if you are looking to prepay any amount of principal on your mortgage that you first contact the lender and 1) get their exact prepayment penalty calculation, and 2) their calculation on paper for you of what the penalty will be to you for a given scenario that you outline to them.
With the exact information in hand, you will be in a much better place to make an informed decision about whether or not, for example, a mortgage refinancing for a lower rate is going to be 1) cost effective in the long run, and 2) cash flow affordable in the short run.
In some cases, prepayment penalties can be substantial, so don’t assume you know the math until its verified with the lender.
That way you’re not going to be unpleasantly surprised by a larger than expected prepayment penalty after you’ve committed to refinance your mortgage.
The best way to decide what to do and get any relevant math correct is to work with an experienced mortgage broker who can go through all relevant scenarios with you so you know you’re making the right decision.
Click Here To Speak With Toronto Mortgage Broker Joe Walsh
When it comes to wanting the lowest mortgage rates, the best available offers can fall into the be careful what you wish for category.
Most of the time, the lowest cost fixed rate mortgage programs are basically stripped down to the bone, not providing for any type of prepayment in excess of your scheduled payments that won’t trigger a prepayment penalty.
That being said, as rigid as these programs can be, some will still allow you to increase your payment once a year or provide other very subtle, low value benefits in exchange for the best mortgage interest rate they are prepared to offer.
This can be still be a very good fit for first time home buyers or people with rental properties where there is absolutely no intention to want to be paying anything additional down on the mortgage during the mortgage term.
For everyone else, its one of those buyer beware situations that you need to make sure that a slight reduction in interest rate does not automatically take away a prepayment privilege that may be valuable to you over the mortgage term.
There could still be situations in the future where even paying a prepayment penalty may still land you a net savings on a better rate, but you’re going to have to work through the math with your mortgage broker to make sure that is the case. And even if it is, you’re still going to have to pay the repayment penalty out of pocket and net the savings over time, so cash in hand would also be important to make this scenario work.
In any case, there are pros and cons to any mortgage program and if you’re truly looking for the best rate, you may have to compromise on some of the other features that are common with many of today’s competitive mortgage programs.
Before you make any sort of decision, the best course of action is to always be working with an experienced mortgage broker who can not only identify the program that meet your requirements, but also go through the specific terms and conditions of each program and how they may impact you in the future.
Commercial mortgage rates can be significantly influenced by competition in any given area of the country.
Even for nationally recognized lenders, they can have very different underwriting rules and rates for each of the different regions they operate in.
Most of the reasons for this relate to competition and risk which are also related to each other.
Let me explain.
The more risk any particular market is deemed to have, the less competition that will exist. For commercial property markets, the biggest risk to a commercial mortgage lender is a low volume, long sales cycle commercial resale market. In these areas, there has to be a greater lending focus on the more localized factors that are going to make or break the underlying business that’s servicing the debt as the security by itself does not provide as much comfort to lend money being that its hard to know when a lender pay be able to recoup their principal from a foreclosure action and how much they might get back when the dust finally settles.
A thinly traded market also tends to suggest lower amounts of commercial properties requiring financing, and still lower amounts of similar commercial properties being offered for mortgage security.
As a result, the harder the market is to operate in with respect to risk management, the fewer the players will be with respect to those that issue commercial mortgage financing facilities.
For the lenders that do service markets with lower levels of competition, the cost of borrowing is likely going to be higher than in a more competitive market.
Taking it one step further, regional commercial mortgage lenders can also be more stringent in terms of what they are prepared to finance and the terms they are prepared to offer because they know there isn’t going to be much alternative competition to what they are offering.
The tighter financing options available will also impact the cost of real estate as buyers will only be prepared to purchase properties where sufficient leverage can be provided.
The opposite is going to be true of larger metropolitan areas where active resale markets and higher levels of overall economic activity reduce lender risk which in turn increases competition for available commercial financing opportunities.
So unless your target property is located in or near a major economic center, there is a good chance that commercial financing will not only be harder to locate and secure, but the rates will be higher and terms more strict that what you could expect in other areas of the country, from the same or different commercial mortgage lenders.
If you’re in need of commercial mortgage financing, I suggest that you give me a call so we can go over your requirements together and discuss different commercial property financing options that may be available to your in your market area.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
According to a recently completed survey by the Canada Mortgage And Housing Corporation, 80% of Canadian home owners are doing some form of annual budgeting, and 71% have factored into their budgeting efforts the possibility the interest rates will be going up.
Here’s more information on the survey from the financial post”
The major risk area of people not prepared was in the new home owner category where budgeting and cash flow planning was not as predominant as with longer term home owners.
It would seem that all the news related to the projected future path of interest rates and tightening up of mortgage regulations has registered with Canadians that they must be prudent in managing the level of debt they are carrying, primarily mortgage debt, and the potential costs of carrying the debt.
The survey also indicated that 75% of respondents were focused on paying off their debt as soon as possible. Once again, this is good for the economy as a whole that the majority of the general population is more capable of withstanding a significant interest rate increase or a real estate market price adjustment.
It will be interesting to see how mortgage holders will continue to view fixed and variable rates in the months to come in terms of balancing cash flow management in the short term and interest rate risk in the longer term.
As a Canadian mortgage holder or future mortgage holder, there has never been a better time to select a mortgage program that best fits your budget and debt repayment preference.
And with all the information now available on line, its much easier to get a sense of where things are headed in the local and global financial markets, as well as first hand information on how different mortgage products can help you better manage your finances.
Hopefully interest rates will continue to stay down, but the reality is they are more likely to go up than stay where they are for any extended length of time.
If you’re going through a budgeting process and want to further develop your mortgage repayment strategy, I suggest that you give me a call and we’ll go through everything together and get all your questions answered.
Click Here To Speak With Toronto Mortgage Broker Joe Walsh
We now have a couple of major mortgage lenders offering Home Equity Line Of Credit Rates at prime minus a half while at the same time the unsecured lines of credit continue to be on the rise.
Don’t be too surprised to see more of the major mortgage lenders that offer HELOC’s to follow suit with the Prime -%0.5 rate in coming days and weeks ahead.
As borrowers, this is great news with personal capital getting cheaper and cheaper provided that you have good credit, cash flow, and some equity in your home.
If you’re wondering why this is happening now when there is still a lot of talk about rates going up and potentially further mortgage regulations being considered to limit mortgage credit risk, my guess is that the answer has a lot to do with competition.
Mortgage lenders, especially the major banks are investing heavily in attracting and keeping residential mortgage customers. Most of these lenders are integrated financial service shops that want to be selling mortgages, lines of credit, car loans, credit cards, investments, and insurance to their customers for decades to come.
So anything that helps them latch on, or stay latched on to their customers is preferred. Even with that being said, the prime minus Heloc rates would also indicate that mortgage lenders are not overly concerned about the housing market as a whole and believe that home equity leverage is a pretty secure bet.
And even though these market leading Home Equity Line Of Credit Rates are 2.5% today, they could easily be 5% in a couple of years if long term mortgage rates tend to start moving back into more of a historical posture.
But in the short term, Home Equity Mortgages in the form of a line of credit have now become the cheapest source of short term or readily available money you can get your hands on.
So how might you take advantage of these great rates?
Well, if you have a fixed mortgage that still has a number of years remaining on it, but has some prepayment options attached to it, you may want to consider paying some of it down with funds from a Home Equity Line Of Credit to cost average your interest rate down. If you’re planning to be paying down your mortgage faster than the amortization anyway, then this can be a way to get the most benefit out of the exercise by reducing the interest cost today and using your extra cash to pay down the HELOC when you have some available.
Nowadays mortgage companies are putting more and more flexibility into their mortgage programs to suit whatever repayment plan you may have. But if you presently have a mortgage that’s been in place for a couple of years already, the rate may be quite a bit higher and prepayment terms less flexible than what you could sign up for today.
So creating your own mixed rate mortgage may be an option through utilizing these great HELOC rates in the short term.
And if you have equity in your home and you’re utilizing an unsecured line of credit right now at an interest rate 2% above these top end Home Equity Line Of Credit Rates, then it may be worth moving from one to the other.
Obviously, this also represents a very flexible source of capital for all sorts of other uses.
Even if you don’t have a current use, it still can be advantageous to get something in place now at the current offering so that you have ready access capital in the future.
If you’d like to learn more about HELOC rates and terms, give me a call and I’ll make sure you get all your questions answered right away.
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The commercial business mortgage application process for a bank or institutional lender can be very different from a private mortgage lender.
First of all, a bank or institutional lender, by definition, is a low risk lender, providing prime plus interest rates in most cases. In order to commitment to providing a commercial mortgage, the bank or institutional lender must determine that the risk of loss is appropriate for their lending criteria.
In order to accomplish this, they take a look, in detail, at the security being offered, cash flow repayment, business model dynamics, balance sheet leverage of the borrowing entity, personal covenants in many cases for the owners of the business, credit of the business and personal owners and so on.
Step one in an institutional commercial mortgage is completion of a complete information package that can take some time to prepare as it typically will require the last three years of historical financial statements for the borrowing entity, current year interim statements along with all supporting sub ledgers and schedules, two or three years of projected financial statements including income statement, balance sheet, and cash flow all reconciled, a rent roll if the financing is on a rental property, and a business plan/business overview that accurately describes all the working parts of the business and how each may lend to profitability and business risk.
Once a complete application is submitted, an initial review will be preformed from which follow up or clarifying questions are likely to arise. This can result in requests for additional information that will need to be compiled or prepared and submitted to support the primary application.
If at this stage of the process, the lender sees the potential for providing a commercial mortgage, then a term sheet would be issued outlining the potential terms and conditions of a commercial mortgage facility.
If the applicant signs back the term sheet, then the outlined conditions would next need to met in order to get to the stage of a formal commitment for funding.
The conditions that typically will be required to be covered off at this stage include a third party appraisal from an AACI appraiser, an environmental assessment, and potentially accountant prepared year end or interim statement to bring everything up to date.
If everything checks out, then the lender will issue a commitment which will outline any remaining conditions that will need to be met and the borrower covenants.
All in all, this process is going to take at least 60 days and in many cases the time period will be even longer depending on the amount of time it takes to complete each step and get all the information requirements covered off.
In direct comparison is the commercial mortgage application process for a private mortgage lender.
While many of the same items are going to be required, a private lender is going to be more focused on the equity in the pledged security and the marketability of the real estate now and in the near future.
Cash flow repayment is going to also be important, but not to the levels required by a bank and institutional lender.
And if things like appraisals or environmental appraisals were completed in the last couple of years and readily available, these may suffice for the private lender’s purposes.
Because of the more streamlined process, a private lender commercial business mortgage application process is going to be at least 30 days from application to disbursement with some deals taking longer once again to the time required to complete conditions or outstanding information requirements.
Time, effort, and lender relevance to a deal are all key factors in the commercial property financing process.
Spending too much time and effort focused on the wrong lender can cause serious problems to the business or property owner if funding must be in place by a certain time.
On the flip side, working with too many mortgage providers can be a bad idea as well due to the amount of work that goes into assessing a deal.
The best approach for securing an optimal commercial mortgage in the time you have to work with is to enroll the services of an experienced commercial mortgage specialist to guide you through the process and get you focused in on the most suitable lenders for your requirements.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh For A Free Assessment Of Your Options
Cash back mortgage programs are fairly new to the market, but gaining popularity with a couple of different groups of borrowers.
While there are a number of different versions to a cash back mortgage, essentially the mortgage lender is providing cash back to you on closing of the mortgage, and potentially during the mortgage term, as an incentive for you to commit to a variable or fixed rate mortgage for a period of time.
For the rate shopper, this can provide a very competitive, and sometimes best available effective mortgage rate. This is accomplished when the cash back received is immediately applied to the principal balance outstanding on the mortgage, reducing the interest costs over time, and lowering the overall effective rate you’re paying.
For those looking for a mortgage refinancing where one of the applicant’s goals it to free up some additional capital out of equity via a larger mortgage, certain cash back programs can provide advantages over conventional mortgage programs. For instance, if the new mortgage rules regarding maximum loan to value for mortgage refinancing is not going to allow you to generate the amount of incremental funds you’re looking for through a refinancing action, the cash back mortgage is an interesting option to consider.
With certain cash back mortgage programs, you can refinance to the maximum loan to value allowed according to the value of your property and immediately receive a cash back payment on closing of anywhere from 1% to 3% of the new mortgage amount, providing incremental funds to be used however you wish.
You’ll also need to keep in mind that breaking a cash back mortgage before the term is up can be fairly expensive as most programs require the repayment of the cash back amounts advanced in full as well as any prepayment penalties that may apply.
The cash back mortgage program is not going to be the best fit for everyone, but for rate shoppers that are prepared to lock in for a period of time and mortgage refinancing actions that need to generate a bit more leverage, these programs can be a very good fit.
If you’d like to know more about cash back mortgage programs and how they may fit into your mortgage financing requirements, please give me a call so we can go over your situation together and work through the numbers to see if a cash back option makes sense for your mortgage needs.
