How can I Stop Renting and
Buy with Zero Down Payment?
How to Purchase a House with
Cash Back Mortgage + get Money for Renovations?
Let’s first start with, in simple terms What Is a Cash-Back Mortgage?
Some Lenders including Banks offer a Cash Back Mortgage Program.
Meaning a certain portion of the Property Value is rebated to the purchaser upon successful closing.
Now you will ask “What’s the catch with Cash Back Mortgage”?
They charge a higher interest rate.
They don’t offer a variable interest rate.
If you break the Mortgage Term you have to return the Cash Back.
Additionally, you have to qualify for an amount with posted interest rate.
Let’s discuss “Is Cash Back Mortgage Good or Bad”?
How about answering the above with an example shown below?
Using $100,000 as mortgage amount and up to 5% as cash back.
Calculations with Cash Back:
Cash Back amount = $5,000 [i.e. 5% of $100,000]
Assuming 5 year posted interest rate is 4.74%
Mortgage Payment amount would be $566.89 per month.
Calculations without Cash Back:
Assuming interest rate to be around 2.89%
Mortgage Payment amount would be $467.62 per month.
Difference with cash back and without cash back
= $99.27 per month [i.e. $566.89 – $467.62]
Total 5 Year amount difference = $956.20
[i.e. $99.27 X 60 months = $5,956.20 – $5,000 cash back amount = $956.20]
So you approximately paid $1,000 extra using Cash Back or
$5,000 for a $500,000 mortgage in a 5 Year fixed Mortgage Term.
Now analyze how much did the Property Market Value increase in 5 years to get your answer.
Next, should you stay away from Cash-Back Mortgage offers!
Consider the following when answering the above.
Do you want to take advantage of this hot Greater Toronto Real Estate market?
Can you ponder on this; my mortgage amount is a kind of forced saving?
Are you bogged down with interest rates and not wanting to dwell further?
So How can I Buy a House with Zero Down Payment and No Closing Costs?
Regarding Closing Costs, this amount you have to come up by yourself.
Consider first and last month rent, additional savings, borrow from family, friends etc.
Sometimes you may qualify for an extra cash back to augment this amount.
Closing costs are generally 1.5% of the purchase price.
You also get a Refund being a First-Time Buyer in Ontario.
If you do all the math, it is not difficult to come up with this amount.
For initial down payment, you can use your RRSP.
Under the Home Buyers’ Plan [HBP] you can take out up to $25,000 per person from your RRSP.
Some lending institutions will allow you to take out money from your line of credit.
Repay line of credit with cash back thereby prompting Buy with Zero Down Payment.
How to Purchase a House with Cash Back Mortgage + get Money for Renovations?
This one is interesting if you foresee minor renovations or are indulging in a Fixer-Upper.
Some Lending institutions offer cash back mortgages and
affiliate themselves with a program called Purchase Plus Improvement.
So let’s say you qualify for a mortgage up to $500,000.
But you are only buying a property whose purchase price is $450,000.
Under this program you may qualify and can get money for renovations.
I have assisted many of my clients with all of the above to fulfill their Dream of Owning a Home.
Feel free to call / email me regarding your unique situation.
You will feel glad you called and thank yourself later.