The Cash Back Option, as the name implies, will effectively give “cash back” to the borrower when the mortgage is funded.
This option is available for borrowers who may require additional funds at closing time to pay for items like closing costs, new furniture, or appliances.
As an example, if your mortgage is $100,000, a lender could offer the follow cash back options:
| Mortgage Amount |
4% Cash Back |
5% Cash Back |
7% Cash Back |
|---|---|---|---|
| $100,000 | $4,000 | $5,000 | $7,000 |
| $200,000 | $8,000 | $10,000 | $14,000 |
| $400,000 | $16,000 | $20,000 | $20,000 |
Make sure when you speak to your Mortgage Professional to outline the costs associated with a Cash Back Option. Generally this option will reduces the amount discounted off the posted rate for the mortgage amount. Also a pro-rated amount of the cash back can be clawed-back by the bank if the mortgage is broken before the end of the term (eg 5 year fixed).
Like all options available, its best to evaluate to determine which will provide the best desirable outcome.
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