Zoocasa Ask Pros Section – Question of the Week: “I’m a first time home buyer and I’ve heard of a cash back. What is a cash back? Will it hurt me on the long run mortgage-wise?”
This week’s featured answer:
Cash Back Mortgages are available to those who do not have a down payment or maybe you would like some money for other uses. The rates are higher, especially if you are using the money for the down payment. A couple of items to consider.
- If using the cash back for the down payment, you are essentially using 100% financing. Lenders will only renew up to 85% Loan to Value which means you will have to pay a lot of principle to renew your mortgage in 5 years.
- Rates are extremely low and if you could borrow a 5% down payment from friends or family, you will get a much more competitive rate and save in interests costs in the long run.
There are many other issues to consider so I would suggesting sitting down and speaking with a qualified Mortgage Professional to look at your situation and come up with a couple of scenarios that meet your expectations.
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