What is a Cash Back
Mortgage?

Typically, this type of mortgage is used to bring debt servicing in line in order to qualify for a mortgage. For instance, in the past we have seen borrowers use the cash back to pay off a credit card in order to bring their debt service in line with the recommended ratio. Paying off a credit card or other form of debt is the most common use for this mortgage product, however, the cash back sum can be used for anything essentially.

When does this mortgage make sense?

• If you are struggling to pay for costs associated with a home’s purchase such as closing costs, legal fees and land transfer tax.
• If you are “income strong” (high earning income) but have a higher level of debt and can utilize it to pay down high interest debt.
• To supplement for renovations or furnishing costs with the home.
• To invest or put into your savings account to assist with monthly costs of home-ownership.

One important thing to note before applying for this type of mortgage is that the applicant must be applying with less than 20% down payment. This makes this mortgage type a High Ratio/Insurable Mortgage, meaning there is a higher interest rate associated with it. In our experience, the higher interest rate is approximately 0.5% above that of a standard interest rate. And, those with less than 20% down payment are subject to a mortgage default insurance premium.

Lenders will also have different policies regarding the return of cash back rebates. It is important to understand the guidelines of the lender if you are considering this type of mortgage. It should be noted too that in the event that you break your mortgage term early (7/10 Canadians do), you will need to pay back a portion (or all) of your cash back rebate to the lender in addition to the penalty to break your mortgage early. The same consideration will apply if you opt to refinance your mortgage before the term is completed.

There are many fantastic Tier 1 “A Lenders” that we work with here at GLM Mortgage Group who are able to offer our clients Cash Back Mortgages, at the sharpest rate! Contact us today to learn more about a Cash Back Mortgage or you can apply now in minutes with our mortgage application. We are looking forward to helping you reach your dream of home-ownership!