By Christos Gitersos       

I’ve ran in to a couple people in the past few weeks that have taken cash back mortgages. Particularly with one bank who is promoting them heavily.

You have to be very leery of them as they may not work out as you thought.

Remember, this money is not ‘free’ money. They make it up in the mortgage rate they charge. Which is usually higher than the ‘best rates’ the market has to offer.

Also, the biggest kicker is that if you were to break your mortgage you will have to repay this money back. Which means if you had to sell your home or change your mortgage, say half way through your term, and equity was tight already, you may be having to pay money back and not have anything left.

In the most recent example I came across…The mortgage was still a couple years out and the guy had to get out of his mortgage. He had to pay back $12,000 for this cash back, which was the original amount (remember the rate he’s been paying is slightly higher too) as well his penalty to break his mortgage was about $2-3,000 higher than if he used a non bank lender. (Big banks are known by fact to have higher pay out penalties than the lenders we use. I’ve done the math a hundred times)

The moral of the story is to be very careful when thinking of cash back mortgages. Talk to an independent specialist and not just the one bank branch.

Christos Gitersos www.gitersos.com