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Originally Posted by alltherage
Has anyone ever heard of cash back mortgages? I know essentially you pay higher interest on the "cash back" portion but just wondering how these work. As a first time home buyer this might be the right way to go.
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There are a few lenders that still offer cash back mortgages. We were actually discussing them a bit in another thread.
Basically the lender "loans" you the 5% needed for the down payment. They forward the funds to the lawyer at the time of closing.
In return you pay a significantly higher interest rate for the 5 year term which effectively pays back the loan and then some. Right now Scotia is offering cash back mortgages at 5.39% when you can get a regular 5 year at 3.89% (they aren't the lowest either there are a few in the 3.6% range)
I know it can be tough to come up with 5% with house prices the way they are but I would highly reccomend it if you can. It is a far better route to go than the cash back opttion.
Not to mention to qualify for the cash back option you application has to be absolutely sparkling. They are quite a bit more difficult to qualify for.