Cashback can be a good tool to help you get what you want. It can also be a attractive bit of flash that ends up costing you more in the long run if you don’t actually need it. The first thing you should look at it whether or not you actually need the money for something that you can’t get another way. If you take cashback on your mortgage, you’ll pay a higher rate on the entire amount of your loan. That’s a lot of extra interest to pay if it’s not necessary. If you don’t need the money, then it’s generally a good idea to take the lower rate and put a few extra dollars in your jeans.
If you do need the money, talk with us to find out if there’s a more cost efficient way to get it. For example, a low interest line of credit might do the trick. Even if the rate on the line of credit is higher than what’s being offered on your mortgage, it’s only being charged on the small amount that you need instead of being charged on the entire mortgage amount. You can pay it down quickly and get rid of the debt, leaving your mortgage with a lower rate. Borrowing the money another way also leaves you some flexibility if you need to sell your home unexpectedly.
If it’s determined that you need the money and that cashback is the most effective way to get it, make sure that you fully understand the terms of the cashback agreement before you sign. Not all lenders have the same terms, but they’ll all have some sort of repayment clause in the event you break your contract with them before it’s matured. Some lenders will require that you pay the entire amount back in full, while some might pro-rate the amount you’ll need to repay. Find out if it’s repayable if the mortgage is assumed by another person, or if it’s transferred to another property. Know what you are signing up for when you take that extra money being offered.
