Before a home becomes what you really want you to be, it takes so much more than just purchasing the house. You will find that you have some additional expenses that may come up afterward including renovation, buying of furniture, paying of maintenance fees if you live in areas that require that, amongst other cash needs.
You will, therefore, find that you may not have sufficient funds to cover these additional expenses. You can, therefore, apply for a cash-back mortgage from your lender. The lender will advance you a lump sum of money when your mortgage closes, and it usually ranges between 1 to 7% depending on your lender.
You need to know that not all lenders offer cash-back mortgage and a good mortgage broker will be able to advise you on which lender to go to for the best rates.
What is the cost of a cash-back mortgage?
Cash-back mortgages come with fixed interest rates which are usually higher than what you would pay for a standard mortgage. This is the way the lenders protect themselves because they advance you the cash up front.
The main advantage of cash-back is that you get tax free cash rebate. This means that you can use this money to take care of some of the expenses including renovations, you can save the money, and you can use it to pay legal fees, land transfer taxes amongst other things.
Other than the high interest rates, you need to be careful about adhering to terms of payment. Refinancing or breaking mortgage terms can result in you paying back a portion of your cash rebate or even the full amount depending on the lender.
A good mortgage broker should be able to advise you on the best cash-back mortgages available in the market since they are not consistent and may vary from lender to lender or from time to time. Lenders will offer cash-back on mortgages as a way of getting customers to borrow. It is really reassuring because it shows the borrower that they will have money even after the mortgage closes. Some lenders require that a customer stays with them for up to three years before they can benefit from cash-backs. .A mortgage broker will, therefore, negotiate with a bank on your behalf from a position of power because they deal with their lenders all the time and therefore know how to negotiate with them to your benefit.
Understanding cash back agreements.
As mentioned earlier, cash-backs are a reward given to you by lenders and are an incentive for you to stay with them for a long period of time. The cash-back allows the bank to lock you in for a period of time. Before taking the cash-back, you need to be sure that you understand all the terms and conditions because they vary from lender to lender. One thing to note is that some banks will take back the cash-back if you refinance your mortgage. If you retain your lending with the bank, they will normally not take it back.