Banks to Put an End to Cash-Back Down Payments

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Mortgages featuring cash back down payment are on the verge of extinction, says Marcus Arkan, a mortgage expert and CTO of Syndicate Mortgages

With the recent amendments in Canadian housing and mortgage rules, the housing market has slowed down with less buying and selling taking place. This is because of the increased costs of mortgages led by the new more stringent rules.

These amended rules have faced continuous criticisms from the borrowers and lenders alike. As a result of these changes, the costs of mortgage loans and prices of homes have increased considerably making it unaffordable for the borrower to purchase homes. Consequently, the lenders have experienced a decrease in their business activity due to the reduction in demand for mortgages.

These changes have affected both the borrowers and the lenders alike. In an attempt to be in line with the banking regulations, the banks in Canada are terminating cash-back down payment mortgages. Scotia bank was the only bank who was offering such mortgages to date, however, its ‘free down payment’ program was also terminated on September 15th, 2012.

It is believed that cash back mortgages were not suitable for owner-occupied purchases. However, they could have made sense for rentals instead. Though there may be a few exceptions to this, a majority of the individuals who wanted cash back mortgages were merely a bit too enthusiastic to buy.

The Office of the Superintendent of Financial Institutions Canada (OSFI) put an end to the use of cash back products by the various financial institutions. Instead, this was replaced with the requirement of 5% down payments on all financial products. This move of OSFI was fully supported by the Canadian Association of Accredited Mortgage Professionals (CAAMP). This change was mainly aimed at improving the participation of the borrowers in the loan agreement.

All financial institutions were required to terminate all their cash back mortgage products no later than October 31st, 2012. Such cash back mortgages were generally used by borrowers to pay for the transfer tax on lands, closing costs, lawyer’s fees, etc.

Marcus Arkan, a mortgage expert and CTO of Syndicate Mortgages elaborated, “With banks still dealing in cash back mortgages, there was a possibility that the amended housing and mortgage rules would not have had that much of an impact on the market as was expected. Thus, OSFI terminated such mortgages to maintain consistency with the amended rules”.

To know more about the current mortgages being offered, visit the Syndicate Mortgages website.

About Syndicate Mortgages Inc.
Syndicate Mortgages Inc. is one of the leading Canadian mortgage brokerage firms. Founded in 2008 in Ontario, the company specializes in residential, commercial and construction financing across Canada. With years of experience and expertise in the mortgage industry, and access to an array of lending institutions across Canada, Syndicate is known for finding the best mortgage rates for their customers. Syndicate has branch locations across Canada. For contact, please use the following details.

Contact Details
Syndicate Mortgages Inc.
Toll Free: (888) 646-1062
Email: info(at)smibroker(dot)com

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