Why Pay A Higher Rate

Why would someone ever want to pay a higher mortgage rate than he or she had to?

Some people trade a low rate for cash back.

Most cash-back mortgages are pricey, but there are a couple of lenders out there that do it somewhat economically. FirstLine might be the most popular example.

FirstLine lets you pay a reasonable rate premium and get cash back on closing. And, if the amount of cash back is under 2% (roughly), theres often no clawback if you terminate the mortgage early. Most cash-back mortgages have clawback provisions. (A clawback is where a lender asks you to return a pro-rata portion of the cash-back they gave you, if you break the mortgage early.)

People use cash back for a variety of things. Two interesting ones are:

Making additional RRSP contributions to generate a tax refund

Getting cash back on a rental-property mortgage and using it to make a prepayment on a non-deductible home mortgage

This last part is more of an observation than anything else. We dont advocate specific tax strategies so consult a licensed financial advisor or tax practitioner before employing anything similar to the above

If you have any questions regarding your localized real estate or are planning to buy or sell please call me on 416 358 2922 to see how I can protect your best interests.

With variable rates at 2.05% making a $200000 mortgage works to $680 per month.

Vyomesh Pandya
Century 21 Star
Real Estate and Mortgage Broker

Click on the calculator to check mortgage amount for different amount on http://tinyurl.com/yournexthome

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