It can get exciting to see campaigns around “cash-back mortgages.” Before you get too far along, here are three things you might not know about these types of mortgages:

1. Occasionally you will see campaigns on cash-back mortgages. These types of mortgages are available through a few lenders. It can be helpful to shop around to see different terms and conditions as this will affect the overall loan.

2. When it comes to cash-back mortgages, you are getting a loan on top of your mortgage. The interest rates are calculated to ensure you will have to pay the lender back the money they gave you (perhaps a bit extra!) by the end of your term. Be mindful that these loans can come with higher interest rates. In some cases, the extra can be more than you got in cashback.

3. Typically the cash-back mortgage operates on a 5-year term. While you may not plan to move before the mortgage term is up, sometimes unforeseeable things happen. If you break a cash-back mortgage, you will have to pay the standard penalty. You will also have to pay back a portion of the cashback. For example, if you are three years into a 5-year term, you would have to pay back two years or 40% of the cashback amount. Combined with the standard penalties for breaking your mortgage term, this can add up if you’re not careful!

Before signing for a cash-back mortgage, it is a great idea to discuss your needs with your mortgage expert. I can advise regarding all cash-back mortgage availability, lines of credit, purchase plus improvement loans, or flex down mortgages that may be better for your situation.