What do borrowers typically receive with a cash-back mortgage at closing?

With a cash-back mortgage, borrowers typically receive a percentage of the loan amount back at closing. This mechanism is designed to provide immediate financial assistance to the borrower when they take out the mortgage. The cash-back is often calculated as a percentage of the principal loan amount and can be used by the borrower for various expenses, such as home renovations, paying off debt, or covering other costs associated with moving into a new home.

This feature makes cash-back mortgages attractive to certain borrowers who might need those extra funds shortly after closing. The cash-back amount is usually issued as a lump sum when the mortgage transaction is finalized, effectively giving the borrower a financial cushion right at the beginning of their new mortgage term.

The other options do not accurately describe what a borrower receives in a cash-back mortgage arrangement. Monthly payment reductions and a payment holiday do not align with the structure of this type of mortgage product. Similarly, while some mortgages may allow for the reimbursement of closing costs, this is not characteristic of cash-back mortgages.