New homeowners always need extra cash for a bevy of reasons. They may want to renovate their newly purchased house, buy some decor and furniture items, paint the house, or simply want some cash in hand in the initial few months of moving into their new house. If you are a homeowner who is reading us, then we must share that Canadian lenders do offer mortgages with which you can get a cash back rebate to be taken out of the mortgage.
Simply speaking, with a cashback mortgage you get an advance (lump sum cash) on the closing of the mortgage. This sum is usually about 5 per cent of the mortgage amount but varies from lender to lender. It can be anywhere between 1 and 5 per cent. You can use this tax free cash rebate from the cashback mortgage for a number of purposes. People usually use it towards the land transfer tax, legal fee, and other such closing costs. It is also used as supplementary cash in the initial months of owning the house, as in investment or in savings, or even to pay high interest debt. Such mortgages are beneficial for new homeowners who can use the cash back rebate to cover other costs which come along with moving into a new house.
Disadvantages of cashback mortgages
You may want to look into the disadvantages of a cashback mortgage before opting for it. You would have to make more interest payments towards the mortgage as these mortgages come at a higher interest rate. But some may want to still opt for cash back mortgages as they are in need of the sum offered via these mortgages. It depends on the financial situation of a person wanting to take such a mortgage as immediate access to the money is what they are looking for. Besides, in case you decide to break the mortgage term early or refinance your mortgage, you would be required to pay back a part of the cash back rebate to the lender. There is also a chance that your lender may have asked for a full payment of the cashback rebate in the event of your refinancing or breaking the mortgage earlier than the stated term. This will depend on the terms on which you took the mortgage. So if you are choosing a cashback mortgage, it is always wise to be sure that you will stick with it till the end or it may prove to be a costly affair. Another disadvantage is that if you're taking cash back mortgages from a bank, they cannot be sought on variable rate mortgage products. They are available only fixed rate mortgages and with a term of three years or more.
If you are looking for a cashback mortgage you must know that not all lenders provide cashback mortgages. It is therefore recommended to use the services of a broker to help you find the lenders that do.
Do reach out to LendX for your cashback mortgage requirements. We will be happy to help.