Ontario Mortgage Agent Practice Exam 2025 - Free Mortgage Agent Practice Questions and Study Guide

A cash-back mortgage typically features a higher interest rate compared to other mortgage types. This is due to the unique structure of cash-back mortgages, where the lender offers a percentage of the mortgage amount back to the borrower as a cash incentive at closing. This upfront payment is seen as an attractive benefit for borrowers, particularly those who may need immediate funds for other expenses, such as home renovations or debt consolidation.

To compensate for this initial cash incentive, lenders increase the overall interest rate of the mortgage. Over time, this can result in the borrower paying significantly more in interest compared to a standard fixed-rate or variable-rate mortgage, which do not offer such cash incentives but often have competitive interest rates.

Understanding this dynamic is crucial for borrowers to assess the long-term costs of financing a home, as the higher rates associated with cash-back mortgages can outweigh the initial cash benefit received.