Purchasing a home is one of the biggest financial decisions you’ll have to make in your lifetime. It takes a lot of planning and involves allocating a huge chunk of your savings to finance the purchase, even with a home loan. Getting a rebate from a lender could really ease some of the financial pain you have to endure during the process.
In the mortgage market, there is a mortgage product that can provide you a refund amount upon availing of it. This lending instrument is called the cash back mortgage, and it happens to poses some serious benefits that could help you not only while buying a home but also during the first few months of homeownership. You can use the rebate you receive from this mortgage for many purposes. Some of the things you could use it for are:
1. Fees and charges associated with home buying
Besides the down payment, you also have to pay for related costs out of your pocket. The money you would receive as a rebate could help you pay for legal fees, land transfer tax, and other costs.
2. Supplemental cash during homeownership
You could use your rebate to pad your finances during the first few months of homeownership. This can help you become more stable after shelling out a huge chunk of money during the home buying process.
3. Home renovations
Should there be fixes or upgrades you would like to make to your new abode, the cash back you get can help you fund it. Alternatively, you can use the money to purchase new furniture or appliances for your home.
4. Higher interest debt pay off
If you have some high-interest debts such as credit cards or other personal loans, your rebate could be the perfect solution. You can use the money from the cashback to cross out some debts you have to pay and breathe a little easier when it comes to your monthly payments.
How does the cash back mortgage work?
With a cash back mortgage, you can get a certain amount of money back from your lender when your loan is finalized. For example, if your loan amount is $200,000, you could receive $10,000 back. You will receive this money back upon the closing date once the lender transfers the rest of the money to fund your mortgage.
How much you get back depends on the size of your loan. Usually, your lender will specify whether there is a maximum amount you could get with a cash back loan. You are likely to get up to 5%, depending on your lender, your mortgage amount, and your financial situation. The money you receive from a cash back mortgage is tax-free and available to you irrespective of whether you have an insured or insurable mortgage.
What are the challenges posed by the cash back mortgage?
Having an extra couple thousand dollars upfront can be useful as a new homeowner, but this loan option has a few catches that you might want to consider:
a. Higher interest rate: Generally, a lender offering a cash back mortgage may charge you a higher interest rate to compensate for the money they will shell out upfront.
b. No variable rate option: If you would like to get a variable-rate mortgage, you’re out of luck. Cash back home loans are only available with a fixed-rate mortgage.
c. Non-availability to everyone. A stellar credit score may be needed for a lender to approve you for a cash back mortgage. Most lenders only extend this option to borrowers who have a healthy credit rating, a sound credit profile, or a steady income—all of which need to be easily proven.
As you can see, a cash back mortgage is just one of the many loan products you have to comb through before finding the best one that fits your needs. Fortunately, getting a helping hand from a mortgage broker could be the key to your success.
For A licensed mortgage broker in Toronto, ON, reach out to Team BP & Associates. We are associated with the GABM Franchise of Mortgage Centre Canada, one of the most successful, high volume mortgage entities in the country. The industry relationships and reputation of this team and franchise are highly regarded. Our experts leverage our relationship with the brokerage to bring you the best possible mortgage solutions. Currently, we are providing home buyers a “Peace of Mind” Cash Back Promo of up to 3% as a refund through the cash back mortgage. With this product, we aim to help our clients sufficiently fund their dream home, repairs, renovations, and other home expenses. To learn more about this offer, please give us a call at (416) 918-3364, and we’ll be happy to provide you more details.
However, just because you are promised a return amount from the lender doesn’t necessarily mean that you are going to benefit from this mortgage. There are several different mortgages available to suit a broad range of needs. As experienced mortgage brokers, we can help you find the perfect fit with the least amount of stress. Moreover, we are happy to help you throughout your mortgage journey to ensure that you have everything you need.
For more details about our services, please click here or contact our team by clicking here.
