There is no way around it, buying a new home is a financial endeavor that is massive. And for most people it will be the single biggest investment they’ll make in their lifetime. There is something everyone has to be clear about, while the house in itself is the most expensive aspect of the process, there some additional expenses during the entirety of the transaction.
You may have to buy new furniture, upgrade or renovate your new home, to give it the special touch you are looking for. Perhaps you have already taken out a mortgage to finance the home and even so that may not be enough to finance all the expenses that come with home ownership. To make matters worse, making a substantial down payment presents another challenge.
Thanks to all those possible obstacles on the road to getting your brand-new home, a little something called “cash back mortgages” have come to make our lives easier. This is a financial tool perfect for those who barely qualify for a traditional mortgage but have no money left to renovate, fix or furnish their new homes. Thankfully, there are plenty of mortgage lenders out there offering cash back deals on home loans.
For the last few years, cash back mortgages have become amazingly popular, especially for those buyers capable of making only small down payments.
What is a cash back mortgage and how does it work?
Upon mortgage closure, the lender will give a substantial sum of cash in advance. Based on the property’s value a small percentage will be up for rebate upon closing. Most lenders offer up to 5% in advance of the total value of the mortgage, while others are more flexible offering anywhere between 1 and 7%. This is meant to help those who are unable to come up with the minimum down payment. To be able to make it, 5% is the minimum down payment required by law.
Now, before the lender offers you a cash back mortgage, they will check for eligibility to make sure the borrower qualifies. There are certain criteria which needs to be met according to Loans Canada.
- Salary Payment or by-the-hour. Self-employed people are normally not eligible.
- Having a 650 or higher on your credit score.
- Only the owner or occupier can apply, as long as there no renters on the property.
If you have done all the number crunching you could and you are still struggling to be able to afford a down-payment, then a cashback mortgage may be the right move for you.