Mortgage Blog

CASHBACK vs. CASH INCENTIVE

December 17, 2020 | Posted by: Danny Duong

CASHBACK vs. CASH INCENTIVE

 
The majority of Canadian big banks offer Cashback Mortgages whereby a borrower can receive between 1% to 7% of the mortgage loan amount reimbursed to them upon the funding of a new mortgage.  The interest rate for these types of mortgage offerings are usually higher than a regular mortgage (surprise, surprise!).  But this is expected as the cost of the cash given to the borrower is essentially built into the contracted interest rate.  Still this arrangement can be very attractive for some borrowers who need the money for closing costs, to buy furniture, do minor renovations, or have access to some cash again after the purchase of their home.  Just be mindful though that these cashbacks must be paid back to the lender if you break the mortgage contract early (usually prorated according to time left on the contract, but could also be the full amount depending on the lender). 

A Cash Incentive, on the other hand, is usually a promo (or reward even if you want to call it that) where a lender offers a flat amount usually $1000-$3000 for taking out a new mortgage with them.  Unlike the Cashback Mortgages though, the interest rates charged are usually full discounted rates & the cash does not need to be repaid if the mortgage contract is broken early as well.  The amount of these promotional incentives are based loosely on tiered amounts of the loan (ie. up to 250K, up to 500K, 500K+).  There are usually minor conditions though such as the borrower must set up pre-authorized debit payments for the mortgage using a bank account with the same lender and the mortgage must fund within specific dates of the promotional campaign.

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