Are you ready to buy a home but feel that you're a little short on your budget? Don’t worry, you’re not alone! From coming up with a down payment to closing costs and other household expenses, things can add up quickly. If that’s the case you might consider a cashback mortgage option to ease the financial burden once your mortgage closes.

So, what exactly is a cashback mortgage?

A cashback mortgage is when a lender or a mortgage company offers you an extra incentive with “cash” that you receive once your mortgage closes (when a new term starts). It's a way to encourage borrowers to work with them and serves as a nice value add with extra dollars in your pocket up front.  While these extra funds can’t be used for a down payment, it can help to cover other expenses like closing costs, carrying costs, home renovations, monthly mortgage payments and even furniture and appliances. However, they usually come with a higher interest rate. Lenders will either charge borrowers the posted rate or the discounted rate, plus 1% to 2%.

Cashback mortgages are typically used by buyers who have their down payment but require some additional financial support to cover the other costs that come with the home purchase.

They can also be helpful if you’re looking to pay down any debt, reducing financial stress before your monthly mortgage payments begin.

How does it work?

On average, lenders will give buyers cash back on 5% of the total mortgage; however, every lender is different so it can typically range from 1% to 7%. This cashback amount is added to your total mortgage owing; however, only the original mortgage amount will be registered.

Here’s a good example to simplify things:

Zoe is interested in a cashback mortgage. She has a mortgage of $475,000 and her lender offered her 5% in cash back. This means Zoe will receive an additional $23,750 (5% of $475,000) once her mortgage closes. Her total mortgage will be $498,750, but only the original $475,000 will be registered.

To secure a cashback mortgage, you’ll have to head to a bank or credit union, as private lenders very rarely offer this type of option. In order to qualify for a cashback mortgage, your lender will require you to meet the following criteria:

  • You must be working a steady salary or hourly job (self-employed individuals are usually not eligible)
  • Your credit score must be at least 650 or higher, with a low debt-to-income ratio
  • You must be an owner-occupier of the home (no renters should be on the property)

What are the pros and cons?

While getting cash back from your lender may seem like a great opportunity, it's important for buyers to understand the pros and cons and ensure this option makes sense for them.

Pros Cons
Alleviates stress and financial burden Higher interest rate and penalty fees
Extra cash to pay off debt or cover closing and carrying costsNot applicable to variable rate mortgages
Makes the buying process more enjoyableNot applicable for self-employed persons


Whether you’re a first-time buyer or a seasoned homeowner, a cashback mortgage could be a helpful option to alleviate some of the financial stress that comes with buying and owning a home. At Homewise, we speak to all types of homebuyers on a daily basis and recognize that the process isn’t the same for everyone. If you’re looking into a cashback mortgage, our team of dedicated mortgage advisors will focus on understanding your unique situation to ensure this is the best option for you. Apply online today in just 5 minutes.