Breaking the numbers out, makes it look a lot more attractive that simply comparing the interest rate of a fully discounted mortgage and the cash back mortgage. Thanks for the post.

You make a valid point. But there are a couple of things to consider. Borrowing $10,000 from a LOC or a credit card would mean that Kirk would have to make a minimum of $300 a month in additional payments vs. the $200 a month in additional payments for the cash back mortgage. Having the additional LOC or CC maxed out would affect his credit score as well as his likelihood of getting approved in the future for additional credit. A LOC would also run the risk of having rate increases, and would be less likely to get paid off over the five years.

To further put it into perspective, if you calculate the actual increase in the effective interest rate on the $200,000 – Kirk is only paying an additional .56% per year on his rate, bringing his actual annual percentage rate on the total mortgage to around 4.85% after you deduct the cash that was given to him up front, which is still a historically phenomenal rate.