What is a common feature of cash-back mortgages?

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A common feature of cash-back mortgages is that borrowers receive a refund at closing, which is often funded by a higher interest rate on the loan. This cash-back option allows individuals to have immediate access to a lump sum of money, which can be used for various expenses such as home improvements, moving costs, or paying down other debts.

The interest rate on cash-back mortgages is typically higher to offset the lender's costs associated with providing the upfront cash to the borrower. This structure can benefit those who need cash immediately and are willing to pay more in interest over the life of the loan.

Other options do not accurately describe the unique characteristic of cash-back mortgages. For example, a reduced principal amount does not relate to cash-backs since the principal remains the same but the borrower receives cash at closing. A no-interest payment option is not a standard feature in cash-back mortgages, as these loans still require interest to be paid. Additionally, a lower loan-to-value ratio requirement is not inherently associated with cash-back mortgages, as lending criteria can vary but are not a defining feature of this type of mortgage.

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