Banks Entice Borrowers with Cash

Some big banks want to buy your mortgage business, literally, with cash.

HSBC, CIBC and BMO are all “giving away” money. Here’s a quick run-down of their offers:

HSBC

Cash offer:

• $1,000 for $200,000 to $499,999.99 mortgages
• $2,000 for $500,000+ mortgages

Available on all 5-year closed terms

CIBC

Cash offer:

• $1,000 for $100,000 to $299,999.99 mortgages
• $1,200 for $300,000 to $499,999.99 mortgages
• $2,000 for $500,000 to $749,999.99 mortgages
• $2,500 for $750,000+ mortgages

Available on all 3-year or longer closed terms

BMO

Cash offer:

• $1,000 for $200,000 to $499,999.99 mortgages
• $2,000 for $500,000+ mortgages

Available on all 4-year or longer closed terms

Is the money worth it?

If the mortgage features match your needs and you’re getting the best rate, heck yeah.

But free lunches are few and far between in the tight-profit-margin mortgage business. In many cases (some of HSBC’s offers being a notable exception) you’ll pay a higher rate than you can find elsewhere.

Consider a $500,000 mortgage paying you $2,000 cash back. Using our trusty rate comparison calculator, we see that saving even 10 basis points on your rate is mathematically better than getting $2,000 cash back.

Now, cash is sometimes tight when you buy a new property. Therefore, some people may value upfront cash more than similar or greater interest savings over five years. Fair enough. Just make good and sure you aren’t overpaying for that rebate.

Other strings attached

To get these deals, your mortgage payment has to automatically come out of a bank account with that lender. If you don’t have one, you’ll be asked to open one.

Banks know that if you have a chequing account with them, you’re statistically far more likely to purchase other financial products. That’s why banks can afford to “buy you” up front.

The other key consideration is product features. All of these banks have an unsavoury interest rate differential (IRD) calculation. In other words, if you break one of their fixed mortgages early, you’re going to feel a sharp stabbing pain in your wallet area.

I just heard from a bank customer today who was assessed a $70,000 IRD penalty, and he’s got no recourse. Mind you, he had a seven-figure mortgage, but even with a $200,000 loan you can pay far more than $2,000 to break a bank mortgage. If there’s a chance you’ll quit your lender or refinance before maturity, consider lenders with more consumer-friendly break fees.

Current HSBC mortgage rates | Current BMO mortgage rates | Current CIBC mortgage rates