Cash Back and its Utility

For the vast number of Canadians, securing financing is the answer to home ownership. There are many expenses in addition to the purchase price of the house. After the down payment, there will be closing costs, escrow, homeowner’s insurance, moving costs, utility deposits. Lots of things.

If you chose a home that needs a little work or a “fixer-upper,” you can add some additional costs like materials, workmen, or unexpected repairs. Even if your home is move-in ready, you may want to personalize it with a few touches like new wall paint, new furniture, adding ceiling fans, or other changes. If you are moving into a larger place, you may want some small items like a wastebasket for the extra bathroom you acquired, or another vacuum for the downstairs. While these may seem like minor expenses, they will add up. Just keep track and you will see.

Even if you don’t expect any of these expenses, you may want to have some money put aside for non-house related emergencies like car repairs.

Where will this extra money come from?

There are some great options. Canadian lenders can offer you a cash back in addition of the amount needed to carry the mortgage. Generally, you will be able to acquire about 5% of your mortgage amount but the additional amount will vary from 1% to 7% depending on the lender.

Overall this is a good idea because it allows you to have additional money at the time of closing. For example, if you gave a 10% down payment with the purchase of your property, you could get as much as 5% back on closing. You can use it for home renovations, pay some outstanding debts or simply keep it in your saving for any eventual situations. The other drawback is that the mortgage interest rate will probably be a bit higher. Like any loan, you will need to meet the lender’s qualifications standards.

It could be that this is not the right kind of mortgage arrangement for you. It can be difficult to navigate through the various options available to a home buyer, especially if it is their first home. The best option is to work with a qualified professional. Mortgage brokers are intermediaries between you and the lender. They usually have a number of different lenders available and various options to fit your credit record and needs.

These specialists will walk you through all the terminology and help you understand the benefits and disadvantages of the different types of mortgage options, including those that offer cash back or lines of credit. They can also offer suggestions about how to prepare for the mortgage process like improving your credit rating.

One of the best sources is