Updated: Apr 23, 2020
People like rewards. Admit it—you prefer it when you get a prize or accolade for doing things.
This is especially true when it comes to things we don’t really want to do. This is why dentists give gift prizes to children after they get their teeth cleaned. The promise and lure of the reward keeps children calmer and more manageable (most of the time).
Yes, as adults we’re supposed to have outgrown the need for a reward and make choices and take action because that’s part of being a grownup, but who are we kidding? Deep down you still want to win that prize.
Smart companies (and institutions) know this and use the carrot on a stick notion to bring in customers. I’m sure you’ve seen more than a couple promotions offering you a special treat for, say, buying an appliance or joining a gym. That being said, does it shock you that mortgage providers have been known to use the same mindset?
Join me as I look at what’s being done to sweeten the mortgage honey pot.
If you plan on purchasing real estate chances are high you will end up taking on a mortgage and all the stress that comes with it. After all, 65% of US homeowners have a mortgage and the total mortgage debt is $8.9 trillion).
Stressed already? Well, the good news is today’s mortgage providers want to sweeten the pot and offer incentives.
The most obvious incentive is probably reward points. Chase, for one, offers its customers Ultimate Rewards points, which can be used towards travel, gift cards and more. RBC Royal Bank Mortgage offers a similar system, giving customers 100 rewards points for every $1000 in their mortgage. The RBC system even gives you the option to donate your points to charity.
Of course, if you’re the type of person who hates calculating how many more points you need before you can get your reward you may prefer a more concrete treat.
How about discounts or coupons? Mortgage Allies Oakville has you covered. The broker offers its customers discounts to local businesses, helping to spread the love around.
Meanwhile, Ingram Mortgage has a Referral Reward Program that thanks customers that refer their friends and family with a set of Cutco knives. (Perfect for the new kitchen, right?)
You know the saying, “A spoonful of sugar helps the medicine go down?” Well, incentives can help balance the financial burden you’re about to take on.
There are also more adult ways mortgage brokers can brighten up the mortgage experience.
First-time buyers can apply for grants and tax credits from both the provincial and federal government, potentially lowering both your costs and your stress levels.
Check out the First-time Home Buyer’s Plan. This initiative allows you to withdraw up to $25, 000 from your RRSP to put towards your down payment. There’s also the GST/HST New Housing Rebate, the First-time Home Buyer’s Tax Credit, the Land Transfer Tax Rebate and the RRSP Home Buyer’s Plan. The assistance you get will help lighten the mortgage load.
You can also look into the cash-back mortgage. In this case, you would get additional funds (usually 5%) on top of your mortgage. So a $500, 000 cash-back mortgage would give you $525, 000. The potential that exists in that surplus money would brighten anyone’s day.
Now, taking on a mortgage is full of scary things. Take private mortgage insurance. Who wants the fear of defaulting and the lender taking your house away hanging over their heads? Luckily, there is a way around this: piggyback loans.
Turning your loan into two loans can reduce the amount you need to put down as a down payment, give you a financial buffer and help you plan.
Piggyback loans have been out of the limelight for a while, but they are coming back into favor and can help make your mortgage less terrifying.
Interest rates are another boogeyman feared by potential homeowners. The good news is your mortgage will likely come with a set interest rate for 60-120 days. Also good news is the fact that rates are dropping as competition increases. In today’s market you don’t need to fear a debilitating interest rate on top of your loan. Your reward in this situation is really the fact that you got to be in the right place at the right time.
Remember that, although mortgages are terrifying, there are things put in place that will make it less scary.
Home ownership is an important part of life. It shouldn’t be feared or shunned; instead, it should be seen as a reward of its own. But if you need more of a carrot to get you through the process, fear not: your mortgage comes with great things. Just remember that.