Cash-back mortgages sound appealing — especially when banks advertise “free money” with your mortgage. But the reality is more complicated, and the long-term costs can surprise many buyers.

Here are three things most people don’t realize about cash-back mortgages 👇

1️⃣ More than one lender offers cash-back options

Cash-back promotions aren’t unique to one bank — multiple lenders offer them, all with different conditions.

✔️ different cash-back percentages 

✔️ different repayment rules 

✔️ different penalties when breaking the term 

It’s important to compare lenders rather than taking the first offer you see.

2️⃣ The cash isn’t free — it’s built into the rate

The bank increases your interest rate to recover the money they give you upfront.

✔️ you repay the cash-back through higher interest 

✔️ you often repay more than you received 

✔️ rates can be significantly higher than standard mortgages 

By the end of the term, many borrowers pay back double the amount of the original cash-back.

3️⃣ Breaking the mortgage gets very expensive

Most cash-back mortgages are 5-year fixed terms. But the average Canadian moves in about 30 months.

✔️ you must repay part of the cash-back if you break early 

✔️ some lenders require 100% repayment 

✔️ penalties PLUS cash-back clawbacks can be huge 

For example: 

If you received 5% cash-back on a 5-year term and break the mortgage after 36 months, you may owe back 40% of the cash-back on top of your penalty.

💬 Final Thought

Cash-back mortgages can help with upfront expenses like fencing, appliances or landscaping — but they often cost far more over time. Before locking into a higher rate or a tougher penalty structure, it’s worth comparing all your options.

If you want a breakdown of cash-back mortgages versus purchase-plus-improvements, HELOCs or alternative solutions, message The Frontline Mortgage Group and we’ll guide you through the best fit for your situation.