Cash Back Mortgage – Is it worth it?

July 30, 2012 | Posted by: Mike Garganis

Rates are still at record lows.  There are a few lenders who are offering a cash back mortgage at a pretty good rate.
Let’s compare three scenarios.


 

Scenario 1 -

Cash Back Special

Scenario 2 - Competitor

Scenario 3 -

Mortgage

Purchase Price

$500,000

$500,000

$500,000

Mortgage Amount Required

$400,000

$400,000

$400,000

Interest Rate

4.14%

5.24%

3.29%

Cash Back Rate

3%

5%

n/a

Monthly Mortgage Payment

$1,798

$2,380

$1,730

Cash Back

$12,000

$20,000

$0

Amortization

35 years

25 years (bank max)

30 years

Term

5 years

5 years

5 years

Interest paid at the end of   5 years

$79,322.90

$98,233.27

$62,021.20


Now the first thing you’re probably saying is, “He can’t offer a 35 year amortization anymore, the government changed the rules recently”, this is true, however if you have read my other articles, these rules DO NOT apply to credit unions and other lenders.


Obviously a normal 5 year fixed mortgage is the best deal, but if you’re looking at covering closing costs, consolidating some debt, or even furnishing your new home, the cash back special is pretty good.


By applying $10,$20 or even $50 more to your payments, you will be shaving years off your mortgage and reducing the amount of interest as additional payments applied are added directly against the principle borrowed.

 

If you’re interested in this offer or would like to review your current mortgage plan to ensure you are on the right path to paying off your mortgage, contact me today.

 

Mike Garganis
mgarganis@mortgagebymike.ca
416.481.6444

Back to Main Blog Page

Share This Page On: