Cash Back - Underwriting Fundamentals 101
Cash Back
Our team today, we're going to be talking about cash back.
So there's a lot of cashback offers that you see in the market and it's quite attractive to a lot of buyers.
But a lot of buyers don't know the hidden terms and conditions behind that cashback.
So I want you to know, so when you're dealing with a cash back offer, here is what you should know
So pretty much with the cashback, usually what happens is the interest rate becomes higher on the mortgage.
So the buyer may not actually realize that. So it seems like it's a free incentive from the lender, but in actuality, they're accepting a higher interest rate.
Now, here's where the lenders are really doing the buyers in. So the buyer's been paying a higher interest rate for this cash back anyways, so it should just be given to them.
But it's not.
So if you were to leave this mortgage lender and you did not live out the whole life of your term, so if you've got a five year fixed and you're leaving in year two, they're going to charge you either your full amount of cashback back or a pro-rated amount, which I do disagree with, but this is what they do and then that hinders you as a buyer.
However, cashback has some pluses, right? If you have a large credit card balance of 19.99% and the cashback is an X amount, when your agent runs your dollars and cents it might actually be cheaper for you even though the interest on the mortgage is higher.
Talk to a Mortgage Professional
If you want to weigh your options to learn whether a cash back mortgage is right for you, feel free to book a free strategy call with a member of our team here at LendCity.
All you need to do is click the link below to get started now.