Often is the case that upon move-in the homebuyer finds themselves short of the cash needed to cover instant home-related expenditures. These most often include legal closing fees, urgent renovations or repairs, and even home furnishings.
The cash back mortgage is one solution a homebuyer may want to consider, especially if it means the difference of making the property livable and/or profitable.
This type of mortgage will be attributed a slightly higher interest rate than would a standard residential mortgage, but it can also grant the purchaser up to five per cent of the value of the home in cash up front. If these funds are being applied to home costs that could see the market value of the property rise quite quickly, thereby increasing the amount of equity the owner has built in that home or making it ready for a lucrative flip, the difference in interest rate can be more than made up for.
Cash back mortgages are great products for those purchasing new homes with as-of-yet unfinished basements. These basements can be converted into a rental suite, an at-home studio or office, or day home, meaning your property will start to generate revenue for you, and become partially tax deductible, upon development.
Cash back, or cash for improvements, financing is also ideal when purchasing aging properties, or properties as MLS listings often state are “in need of some TLC”. The fixer upper home can be a great investment, but if certain fixes need to be made right away, before the property can become comfortable to dwell in, having access to liquid funds is essential.
Not every lender in Canada provides cash back financing. In order to find out who does, and which mortgage lender is providing the best rate on this product, discuss the cash for improvements option with a national, licensed broker.