Lender cash back can work for some but doesn't come without cost

I had the opportunity to help a few clients purchase a home who had the interpretation they would not be able to enter the housing market for another year. These clients had solid credit, good job stability but they lacked one of the most common first time buyer requirements, a down payment.

In these, like all cases, we explored every option available for a down payment ranging from grants, HBP (RRSP Home Buyers Plan),  a gift from family, borrowed funds (Line of Credit, etc.) but none were feasible for clients.

This left us with one option which only a couple banks offer, a “Lender Cash Back”. This specific program covers the 5% down payment which is paid from the bank and they also covered an additional .5% to help with closing costs or to help increase the clients minimal savings. As with anything today, this is not free. The bank increases your interest rate in order to make back the down payment over 5 years. Today you can get a 5 year fixed rate at 3.65%.  With this program you get the posted rate which today is 5.39%.

So in all cases the bank makes back the full down payment and you end up paying less towards your principle (along with higher monthly payments) due to the higher interest rate. In some scenarios it can get you into a home sooner than expected but I encourage clients to explore all other options before settling for a Lender Cash Back.

The mortgage you choose should always suit your needs, this is just another option available in the market today that not all are aware of. Please feel free to comment or call me at 306-260-9918 to ask any questions you may have.

Have a great weekend.

Riel Syrenne
The Mortgage Group