Category: Blog

Just as the name suggests, a cash back mortgage is a deal where the lender gives you a cash rebate when the mortgage closes. You could get the cash up front, that is before you start making your monthly mortgage repayments or not. It all depends on the lender.

If you continue your mortgage to the end of the negotiated term of the contract, you won’t pay the cash, back to the lender directly. It is paid in the form of high-interest rates on the entire mortgage; a characteristic of Cash Back mortgage deals.

When could it be ideal to take this mortgage?

Since you will be paying higher interest on your mortgage as compared to other borrowers, you may be deterred from settling for a cash back mortgage. However, there are instances that you may need to consider it. They include:

• When you received a helping hand in making the down payment on your house but need a financial boost to be able to take the responsibility of homeownership
• You could consider it if you had to withdraw the down payment out of your RRSP. You may need additional cash to pay other expenses, e.g. moving, legal, closing costs, etc.
• You need a few extra bucks to act as a buffer for a few extra months as a new home owner. You may need the money for renovating, furnishing, etc.
• You could consider a cash back mortgage when looking at short term costs that come with a mortgage, e.g. administration costs, set up fee, etc.

When hunting for the ideal mortgage for you, you should always take interest rates into consideration, most importantly. If the cash back mortgage deal offers you a similar rate compared to other mortgage options, then, a cash back mortgage, may be a great start for you in homeownership.

Before you settle for any mortgage deal, you will have to analyze the benefits of the options in the short and long run.

When you choose to start hunting for houses, a good mortgage professional will advise you not to start with a meeting with a realtor. You should seek the services of a mortgage expert to help you determine how much mortgage you can qualify for. It is the purpose of mortgage pre approval, in simple terms.

The process of mortgage pre-approval involves different stages and should not be confused with pre-qualification. In pre-qualification, you will not be provided with adequate information regarding the mortgage amount; you will be loaned. That’s its major difference with mortgage Pre approval.

Things You Need to Know about Mortgage Pre Approval

1. It is a process

The Pre-approval process is a process where the potential lender determines whether you are eligible for a home loan and at what amount. You should start the pre-approval process. Usually, 60-120 days, to be able to lock in an interest rate. The amount in a pre-approval is the maximum mortgage amount you can get.

You will need to provide the lender with relevant documents as proof of income, identification, information on your assets and debts, etc.

2. Qualification for a Pre- Approved Mortgage

Once you have provided the bank with all the necessary information and documents, they will assess your financial position. You may need to provide them with recent financial statements of your investments and even account. They will use this information to determine the amount they will lend you and at what interest rate.

The amount of the pre-approval is not guaranteed. You can only lock in a particular interest rate.

3. Factors that may affect your pre-approval process

While still going through the pre-approval process, you should ensure that your actions do not affect your cash flow. If you take a loan or lose your job, it will change your position and possibly, the potential to qualify for a pre-approved mortgage.

Ensure that your financial position remains stable from the start of the pre-approval process to the time you make an offer on a particular property. This way, you ensure and strengthen your case and chances of qualifying for a mortgage.