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An Introduction to Cash-Back Mortgage Loans


A cash-back mortgage loan, also known as an equity draw mortgage, is a type of home loan in which the borrower gets a lump sum of cash upon closing. In other words, with a cash back mortgage loan, you can take some of the equity out of your home right away. This can be helpful if you need money for home renovations, debt consolidation, or any other purpose.


In this article,  we'll discuss cash-back mortgage loans in more detail, including how they work and some of the pros and cons to consider before taking one out.

How Does a Cash Back Mortgage Loan Work? 

A cash-back mortgage loan works like any other home loan—you borrow money from a lender and make monthly payments until the debt is paid off. The difference with a cash-back mortgage loan is that you also get a lump sum of cash at closing. The amount of cash you receive depends on the value of your home and how much equity you have built up.


For example, let's say you own a home worth $200,000 and you have $50,000 in equity. If you took out a cash-back mortgage loan for 10% of the value of your home, you would receive $20,000 in cash at closing ($200,000 x 10% = $20,000).

Who Is Eligible for a Cash Back Mortgage Loan? 

  • To be eligible for a cash-back mortgage loan, you must have equity in your home. How much equity you need varies depending on the lender. Some lenders may require 20% equity, while others may only require 5%.
  • In addition to having enough equity, you will also need to have a good credit score and a steady income to qualify for a cash-back mortgage loan. As with any other type of loan, the better your credit score and financial situation are, the more favorably lenders will view your application.

How to Apply for a Cash Back Mortgage Loan 

  • If you think a cash-back mortgage loan is right for you, the next step is to start shopping around for lenders.
  • Once you've found one or two that look promising, it's time to fill out an application. This can usually be done online and only takes a few minutes to complete.
  • Either way, before signing any paperwork, make sure to read over everything carefully so that there are no surprises down the road.                     

Things to consider when getting one:

  • How much equity do you have in your home
  • Your credit score
  • Your income
  • How much cash do you need
  • The fees and interest rates associated with the loan                                                                                                                                                                                                                              

The rates are generally lower than residential mortgage rates; however, there are still some things you should keep in mind before taking out a loan. For example, make sure you understand all of the terms and conditions associated with the loan—including any penalties for early repayment—so there are no surprises down the road.


Cashback mortgage loans can be beneficial if you need money for home renovations or debt consolidation, but it's important to compare offers from multiple lenders before signing any paperwork. Be sure to read over everything carefully so that there are no surprises down the road!