Consumers should think twice about cash-back mortgages. The national banking regulator seems to be saying as much, reports The Financial Post.

This past week the Office of the Superintendent of Financial Institutions reiterated it doesn’t like the practice at all, recommending mortgage default insurers not underwrite loans that use cash back for a down payment.

Draft guidelines on residential mortgage insurance underwriting practices issued by OSFI included a section on down payment.

“Incentive and rebate payments (ie. cash back) should not be considered part of the down payment,” said the regulator. In cases in which people don’t use their own equity and opt for non-traditional sources as a down payment, the regulator seems to want federally regulated mortgage insurers to consider that risky and charge a larger premiums.

Led by Canada Mortgage and Housing Corp., the Crown corporation that has the largest position in the market, all mortgage default insurers will be raising their premiums come May 1.

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate


More market watch: