Cash-back mortgages are being marketed more in recent months. We extend a word of caution and recommend you ask for, and understand the fine print before proceeding. Short-term financial gain may lead to long-term repayment pain.

One common fine print consideration – Most often if you refinance, or break your mortgage term early, you will need to pay back a portion (or even the full amount) of your cash-back rebate to your lender.

Some additional cons that usually accompany a cash-back mortgage are:

• Higher interest rates than traditional mortgages
• More Strict qualification requirements
• Self-employed people are usually not approved
• No variable rate options
• More hefty penalties
• Owner-occupied only (You can’t rent out)

If you’re looking for ways to increase your cash reserves after buying a home, there are other options you can consider.

• Credit card: A low-interest, or no-fee credit card can give you the flexibility you need to cover things like moving costs or furniture purchases, and pay for them over time, if needed. **Please wait until after your mortgage closes to apply, to avoid fluctuations on your credit report**
• Second mortgage: A home equity loan can allow you to turn equity into cash once you own the home.
• Line of credit: A line of credit is a flexible option for borrowing money, and generally offers better interest rates than personal loans.
• Borrow from RRSPs or investments: Borrowing from your retirement savings or investments isn’t ideal, but it’s definitely an option at your disposal. The Home Buyers Plan allows you to borrow up to $35,000 from your RRSP to help with the down payment and other closing expenses, for example.

Your best interest, is our ONLY interest!

Have a mortgage question? Please reach out to us anytime!

Bob Reader

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