Cash Back Mortgages – Pros and Cons

If you are flipping real estate in Toronto, you may be attracted to the idea of a cash back mortgage. It provides you with extra money at the time of closing to cover legal costs, moving expenses or even furniture for your new home. And it is simple – your cash back money is bundled into one payment upon closing the mortgage.

It sounds great and is ideal for some purchasers – but there are some drawbacks to consider. A cash back mortgage can be an expensive way to access additional funds. You get a nifty lump sum at the start of your mortgage payments, but you can be sure that your lender is getting something better, in the long run. For starters, a cash back mortgage is set at a higher rate than a regular one. You need to spend some time with a calculator (or mortgage broker) to figure out if the extra you will be paying monthly is worth it. You may be wiser to find a lump sum from another source.

Cash back mortgages have penalties if they are changed or renegotiated during its term. If you move or want to refinance at a different rate, then the cash back must be paid – and there may even be a penalty repayment premium.

If you decide to go with the cash back option, a professional broker can help you get the best possible financing to save you the most money over the course of your mortgage.

Getting a Good Mortgage Broker…

But first, take a step back. How do you go about getting that mortgage in the first place. And what if you worry that your credit rating isn’t all that you wish it could be? Is there any hope for you? (The answer is yes!)

Shop2Save has set up a relationship with one of Ontario’s top mortgage brokers, Dominion Lending Centres. Through this partnership, you can be quickly assessed and approved for a mortgage and get valuable monetary credits through the Shop2Save points system.

Dominion Lending Centres has access to over 110 lenders, and this ensures that every borrower can be matched with one with the best rates. The quick process begins with an evaluation form via the Shop2Save app; the referral to Dominion is then made.

Why Dominion? In addition to its size and lender-base, it is committed to taking care to show all the hidden fees and costs buried in a mortgage. This is hugely important if you are considering a cash back situation. And the savings to you going via Dominion’s partner can be considerable. For example, with a $500,000 mortgage you can earn $7700 in Shop2Save rewards. And that is, of course, independent of the payout from the cash back mortgage.

Shop2Save’s Other Savings

A house is the biggest investment you will ever make and getting that kind of a return on your mortgage is a huge bonus. Shop2Save also brings rewards for the many smaller purchases you make, including consumer electronics, clothing, music, health and personal care, sports and outdoors equipment and home improvement goods. All these items – and mortgages – bring you rewards in dollars loaded on to your digital wallet - another positive result of flipping real estate in Toronto.