How do I find the way to choose the right mortgage strategy? - prêt hypothécaire by Gregory van Duyse

You can save thousands, if not tens of thousands of dollars on a home loan if you choose the right loan strategy (prêts hypothécaires). Even on a $100,000 mortgage, the savings can be substantial. So the real question is what should I be doing in addition to looking at interest rates?

How do I choose the right mortgage strategy?

The easy answer: contact a mortgage specialist who specializes in creating custom mortgage strategies for their clients - pret hypothecaire.

Why?

There are three good reasons: 1.Nobody knows the future of interest rates in Canada. 2.The right strategy must consider the current and future economic context. 3.One has to design it according to your objectives and personal situation.

All this is not that simple, and it is best to consult a mortgage broker who does this every day.

But let's not stop there.

The more difficult response is to analyze several factors in creating a mortgage strategy.

To choose the right mortgage strategy you must: * know the strengths and weaknesses of available mortgage products; * identify where you are in the interest rate cycle; and * assess the probability of an increase or decrease in rates over the next 10-15 years.

Understanding the interest rate cycle is a complex area, and many, many books have been written about it. Here, in as simple explanation as possible, are the basics: -Interest rates generally increased from 1950 to 1980. -Interest rates generally decreased from 1982-2003 -Interest rates have remained fairly stable from 2003 to 2006. Without looking at these trends, no one could have been able to devise a successful strategy; if you created a strategy designed for falling interest rates and the rates went up, your strategy would have been a complete disaster.

The two rules: * Interest rates track inflation. When the consumer price index goes up, rates increase and vice-versa. * Interest rates are linked to the economic health of Canada and the United States. When everything is going well the rates increase, and when things go poorly they decrease.

We can't predict the future of interest rates - prêts hypothécaires. All we know is that the average interest rate over the last 30 years is 9.26% and that now it is approaching 5%.

There are basic strategies to work with, and on top of that, a good mortgage consultant will find ways of combining the features of different strategies to suit the needs of his client. It can never be one size fits all when it comes to mortgage strategies; knowing the best strategy or combination of strategies in each situation takes a mortgage professional.

The basic strategies that your mortgage consultant will work with are the following: - 5 times 5 is a situation where a mortgage is renewed five times with a term of five years for each renewal. - A long term mortgage has a fixed rate on a 15, 20 or 25 year mortgage. - A variable rate mortgage has a rate that changes during the term of the loan, with the rate based on the base rate of the Bank of Canada. - The Smith Maneuver is when the borrower (whether he is a salaried employee, or self employed) or can lower his personal income tax by the amount of interest paid on his own home. - A retirement loan uses the equity in the home as additional income for retirement. - A no down payment loan allows the home buyer to borrow the full amount of the purchase price. To decide whether this is the right decision, you have to do the calculations to see whether saving up for the 5% down payment while paying rent is better than taking out a larger loan to buy a home sooner and avoid paying rent. - A less than perfect credit loan means that the borrower uses the funds to improve his credit to get better interest rates in the long run.

An expert mortgage consultant (prêt hypothécaire) will review all of these options with you and devise the strategy that will save you the most money over the life of your mortgage. This what it means when it is said that a good loan strategy is so much more important than getting the lowest interest rate. Each strategy must be analyzed on its own merits vis-à-vis the situation and needs of each borrower and state of the economy.

So what should a borrower be doing? The only way you can be guaranteed to find the loan strategy that works for you is to contact a mortgage expert and work with him towards the perfect strategy for your situation. The consultation is free, but it may save big in the long run.

About the Author
Gregory is an Accredited Mortgage Professional (AMP). To get more information on mortgage loans - prêt hypothécaire, please visit: Informezvous.com - hypothèque