Discover the possibility of buying a home with a 2% down payment! Let’s uncover the secret of cashback mortgages and how they can benefit you.
Some lenders offer cashback mortgages. A cashback mortgage is when a lender gives you money back at closing. These funds can be used to pay down debt, save for a rainy day, buy furniture, renovate a home – or whatever you want. It’s cash that’s given to homeowners at closing. In exchange for this cash, the lender will increase the rate slightly to recoup these funds over the mortgage term while the mortgage is being paid down.
You might ask, “Why would I want a higher rate or take the funds if I just have to pay it back?” While this may only work for some, buying a home can be scary, especially if you are scrapping together all your funds for your down payment and closing costs. This nest egg may be more beneficial now, especially if you can afford a slightly higher mortgage payment.
So, how does this work? The catch is that you still have to give the 5% down at closing. This money can come from savings or a gift from a family member. The lender will give the 3% back at closing, and the funds can be used for anything, no questions asked. Many of my clients will even use these funds to pay down high-interest debts/credit cards. This A) saves money and B) qualifies them for a higher mortgage because they no longer have that debt.
NOTE – if a borrower closes or pays off the mortgage during the term, they will have to pay back a portion of the cashback funds. For example, if a borrower receives $10,000 and is 37 months into a 5-year term. If they decide to sell the home, they would have to pay back $4000 of the cashback.
If you think a cashback mortgage may be right for you, let’s explore this option further.
