Cash Back Mortgage Programs
“Cash Back Mortgage Programs Are A Recent Innovation To Provide More Options To The Home Owner”
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.
About the Author Joe Walsh
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel