What does the term "cash-back mortgage" mean?

A cash-back mortgage is a type of mortgage product that provides the borrower with a percentage of the mortgage amount as cash back at closing. This means that when the mortgage is finalized, the lender offers a rebate or a cash incentive, which the borrower can use for various purposes such as renovations, paying down other debts, or covering moving costs. This can make it attractive for homebuyers who may need extra funds immediately after purchasing a property.

In contrast, the other options describe features that do not align with the cash-back mortgage concept. A mortgage requiring no down payment does not involve the cash-back feature; it simply addresses the upfront cost of purchasing a home. Lower interest rates for cash payments pertain to different loan types, where a borrower pays a larger amount upfront to receive a reduced rate. Refund of closing costs, while beneficial, does not fit the definition of cash-back mortgages since it does not provide cash as a rebate based on the mortgage amount borrowed.