Mortgage Update: 5% Cash Back?

"People keep asking if they can still buy a home with zero down payment. The simple answer is "no". Banks discontinued zero down payment mortgages last year recognizing that such lending practices fueled the financial crisis. The idea is that lenders want to see a potential borrower who has exercised some financial discipline. Accumulated savings are proof of discipline and the ability to manage a family budget. If you have several thousands dollars saved and earmarked for a down payment on your future home, a bank would look much more favorably at your mortgage application."

"Now, let's go a step further. Can we get the mortgage and then perhaps get back our down payment back? For many, moving into a new home pose the challenge of filling up empty rooms with furniture, without racking up credit card debt. A cash rebate would do the trick."

"Lenders have not typically been very generous in that respect, but from time to time they do offer mortgages with 5% cash back. To start you require a 5% down payment from your own savings, but at closing you can get your money back. Of course, this is essentially an additional loan from the bank combined with your mortgage, and at relatively low interest rate. It's a good solution for many, however, it doesn't come for free."

"Cash-back mortgages are always offered at a higher rate. Currently they are available for a limited time only for 5 to 10-year mortgages. A 5—year closed mortgage with 5% cash back is now available at 5.85%. This is 1.7% higher that a conventional 5-year closed mortgage. Looks expensive, but is still better than paying 19% interest on a credit card."

"There are some strict conditions attached to cash-back mortgages which include a provision to repay the 5% if the borrower terminates the mortgage before the end of the term. One should be proceed carefully and consult with a mortgage professional about the terms before jumping into the cash back option."

"Best rates as of today:"

5-year Fixed Rate = 3.89% ... Variable Rate = 2.40%

"Enjoy the long weekend."

Vasko DeLev, AMP
Accredited Mortgage Professional
License # M08000574

Verico Capital Mortgages Inc.
106 - 18 Deakin St, Ottawa K2E 8B7
Direct Line: 613-882-7603
Email: vasko@CapitalMortgages.com