If money is tight and you think that you may need a little help getting through that first month in your new home, you may want to consider a Cash Back mortgage.

Here's how it works.

With a Cash Back mortgage, the client gives up the 'discount' in order to receive a rebate on his mortgage which he receives after the mortgage closes (usually 3-7 business days) . This rebate varies depending on the Bank and term chosen, but ranges anywhere from 1% to 6 % of the mortgage amount. The most common is the 4% Cash Back mortgage featured by many of the Canadian Chartered Banks. This money can come in handy especially for the fist time buyer who needs extra funds to purchase home improvement items such as blinds, carpet, appliances, or even furniture. Which is why first time buyers are the #1 consumer of Cash Back mortgages in Canada.

For Cash Backs that are higher than 4%, you typically would have to commit to a longer mortgage term such as a 7 or a 10 year fixed closed term. Or, on promotional products like the Free Down Payment mortgage that we feature in our Zero Down Mortgages section

So, Why would I want a Cash Back mortgage?

- You are short on cash. You have saved up enough money to purchase your home, but, may be a little short after the mortgage closes. The Cash Back acts as a nice little buffer to get you through the first couple months as a new home owner.

- You utilized the RRSP Home Buyers program and withdrew your down payment out of your RRSPs. Now, you need money for legal fees and moving expenses.

- You received a GIFT from your family that you used for your down payment, but, want some money in order to feel more comfortable taking on this new liability.

Whatever the reason, if this product suits your current needs, please call one of our experienced Agents to discuss your options: Toll free:

Why wouldn't I want a Cash Back mortgage?

Excellent question!

Simply put, a Cash Back mortgage usually costs you more in the end.

You see, the 'discount' in the rate represents the amount the Banks can afford to spend to prompt you to take a mortgage with them, while at the same time maintaining their profit spread over the 5 years of your term. In order to stop clients from asking for further discounts, they started offering rebates up front. This confused us for a while, but, eventually we all caught on.

For instance, over the 5 years of a specified term you may save $9,000* by negotiating a 1.25% discount on your mortgage rate. Where as if you took the 4% Cash Back, you may only receive $6,000 after your mortgage closes. Who get the extra $3,000..??? You know who! The $100 Million per quarter profiteer Mortgage Lender, that's who!

Now, imagine if one of our Agents negotiated your mortgage rate for you, and got you a discount of 1.50%... That might save you an additional $2,000. That's $5,000 in total savings that you could receive by taking the discounted rate negotiated by one of our Agents, as opposed to the Cash Back offered by the Bank. Convinced? Give us a call toll free anytime:

Other things to watch for on most Cash Back offers:

1) the Cash Back will be clawed back (on a prorated basis) if you decide to pay off your mortgage, transfer it, or even make a significant change to it within the first term of the mortgage (i.e., first 5 years)

2) The remaining prorated Cash Back amount could be charged back to the seller of a home if he offers his mortgage up for assumption