Rising Mortgage Interest Rates Shift Borrowing Strategies

Cash back mortgages offer homebuyers additional funds to cover costs like closing or moving expenses by taking out a loan larger than the purchase price of the home. While these mortgages provide immediate cash, they often come with higher interest rates than standard mortgages, affecting the entire loan amount, not just the cash back portion. In contrast, blended mortgages allow homeowners to take advantage of lower interest rates without breaking their existing mortgage contracts, combining the original rate with a new one and avoiding prepayment penalties. The choice between cash back and blended mortgages depends on individual financial circumstances and future plans, as cash back options may incur significant penalties if the mortgage is broken early. Additionally, the mortgage approval process can involve partnerships between major banks and alternative lenders, which may surprise some applicants when they receive a mortgage from a different company. Understanding these mortgage options is crucial for making informed financial decisions.