What is a cash back mortgage? This is a type of mortgage where the borrower receives cash back at the time of closing their mortgage. This rebate usually varies amongst lenders from 1% to 5%. The cost of obtaining a cash back mortgage is reflected in its higher interest rate (to make up the difference the lender is fronting to the borrower).
What are the advantages?
The immediate availability of cash maybe useful for those who need extra funds to renovate, decorate, or furnish their home. The cash back can also be used to pay for something such as a wedding or as an investment contribution. Cash back mortgages are most appealing to first-time home buyers seeking to recover closing costs or for borrowers who are transferring their mortgage and are using the cash to pay off the penalties and unforeseen costs (solicitor fee, appraisal fee, discharge fee, etc.).
What are the disadvantages?
Cash back mortgages typically have higher interest rates which translate to more interest paid over the life of the term. In most cases, the cash advance is not enough to make up the difference in the extra interest payments.
Today, we’ll take a closer look at two types of cash back mortgages made available by CIBC.
|CIBC Cash Back Mortgages||Cash Back %||Term||Cash Back Amount 1||Pre-payment Privileges||Penalty 2|
|Closed Fixed-rate||2%||3 or 4 years||$2,000||Lump sum: 10%|
|Repayment of full cash back amount|
Special CIBC cash back mortgage offers
There are two cash back products that make CIBC mortgage options competitive:
1) CIBC Variable Flex Mortgage with up to 3% Cash Back
This is a variable rate mortgage on a 3-year or 5-year term. This is a unique offering since variable rate mortgages with cash back are extremely rare. The up to 3% cash back offer is so attractive that it is effectively as low as some of the best current regular 5-year variable mortgage rates.
2) CIBC Mortgage Switch Offer
This offer is on a 3-year to 10-year closed term at the low rate with up to 5% cash back. This can be used to offset the penalties imposed by other lenders that are incurred from switching mortgages to CIBC.
All-in-all, CIBC cash back mortgages are pretty attractive. They continue to keep pressure on the competition with their aptly titled, “CIBC Mortgage Switch offer”, which presents a rate lower than the current posted 5-year fixed CIBC mortgage rate Furthermore, CIBC is probably the only major lender offering a competitive variable rate mortgage with cash back.
1 Based on a $100,000 mortgage
2 In addition to the standard CIBC penalty of whichever is the greater between three months interest versus the interest rate differential.