BMO Launches 1% Cash Back Mortgage Promo

BMO is now luring 5-year fixed borrowers with 1% cash back.

If you get a $400,000 five-year BMO mortgage, that’s $4k in your pocket. In fact, the bank will rebate up to $30,000 if you qualify and your mortgage is big enough.

The catch: you need to pay the mortgage from a BMO chequing account. If you don’t have one, you have to open one.

Controlling your chequing account is a big draw for BMO (and any bank for that matter). Not only is it a direct revenue generator thanks to fees and the float (i.e., money you leave in your account earning no interest, which the bank can reinvest), but it also helps BMO sell you other financial products.

This “cross-sale” angle is growing increasingly popular at banks and credit unions as they try to offset the cost of mortgage incentives (like cash back and closing cost rebates) and make up for skimpy mortgage margins.

As a borrower, the appeal of 1% cashback depends on what rate you’re able to negotiate. Consider that:

• A 1% rebate is akin to saving 12 basis points off your rate for five years, give or take.
• If your BMO 5-year rate is over 3.54%, other lenders will likely save you more, based on interest cost alone.
• If there’s any chance you might break the mortgage or renegotiate before maturity, you also have to factor in BMO’s potentially costly fixed-rate penalty formula and limited selection of published deep discount rates.

On the other hand, if you: (1) plan no changes to your mortgage for five full years, (2) need an uninsured mortgage and (3) can negotiate a rate under 3.50%, it’s a respectable deal.

And BMO does have some outstanding features. One is its BMO Cash Account, which lets you re-borrow principal pre-payments at your contractual mortgage rate.

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Here are more details on the 1% cashback offer:

• This promo expires August 31, 2018.
• Your mortgage must close within 130 days from when you apply.
• It’s not available on existing BMO mortgages, including those up for renewal and those refinancing before maturity.
• It’s not available on BMO’s lowest advertised 5-year fixed (the Smart Fixed mortgage) or its ReadiLine readvanceable mortgage
  • Tip: BMO sometimes offers its regular mortgage at the Smart Fixed rate, if you’re well qualified and negotiate for it.
• The cashback does not apply to any other BMO mortgage rates besides the 5-year fixed.
• Maximum cash back: $30,000.
• A pro-rata portion of the cash must be repaid if you break your mortgage early.
• Additional info here.