Hi all, what are your thoughts on cash back mortgages? I've always been against them because it seemed like you would always end up paying more in the long run. However I've been looking into CIBC's offer and on the surface it's seems good. I'm sure I am missing something and was hoping someone could let me know if I am. CIBC just offered me the following on my rental condo on a 3 year fixed:
$220,000 mortgage. 30 year amortization.
2.94% no cash back
3.45% with 2% cash back.
With the cash back I would get $4400 cash up front. On the downside my pmts are about $60 more per month for a total of about $2200 extra over the 3 year term. Also with the non cash back I would end up with about $1300 less owing on my mortgage at the end of the 3 years. Total "cost" is $3500 but the cash benefit upfront is $4400. Plus the extra interest would be tax deductible (i beleive) because its on an investment property. Not sure if the $4400 cash back would need to be used for investment purposes in order to claim the additional interest expense as tax deductible.
I can see 2 downsides. If you need to break the mortgage you pay ALL the cash back. Not just a pro rated portion. Also the higher mort payments will make cash flow harder and may make it hard to qualify for additional mortgages.
I'm sure I must be missing something else? Does anybody here ever use CB mortgages? I'm curious as to what everybody thinks of this offer.
Thanks so much!
$220,000 mortgage. 30 year amortization.
2.94% no cash back
3.45% with 2% cash back.
With the cash back I would get $4400 cash up front. On the downside my pmts are about $60 more per month for a total of about $2200 extra over the 3 year term. Also with the non cash back I would end up with about $1300 less owing on my mortgage at the end of the 3 years. Total "cost" is $3500 but the cash benefit upfront is $4400. Plus the extra interest would be tax deductible (i beleive) because its on an investment property. Not sure if the $4400 cash back would need to be used for investment purposes in order to claim the additional interest expense as tax deductible.
I can see 2 downsides. If you need to break the mortgage you pay ALL the cash back. Not just a pro rated portion. Also the higher mort payments will make cash flow harder and may make it hard to qualify for additional mortgages.
I'm sure I must be missing something else? Does anybody here ever use CB mortgages? I'm curious as to what everybody thinks of this offer.
Thanks so much!
