Articles About Finance And Refinancing

Looking for the best loan (pr?t hypoth?caire) rates?

If you are asking yourself how to get the best interest rate on your home loan, you are asking the wrong question. (For more about that, read How to beat the best rate!). What you should be asking is how do I choose the right mortgage strategy for my particular needs.

What?s the correct mortgage strategy? Well, you probably can?t answer that question for yourself. What you can do is consult a mortgage specialist who specializes in custom mortgage packages. Why do you need to do this? The main reasons are -we don?t know where interest rates are going. -economic conditions, both present and future have to be considered. -A mortgage strategy is a complex, uniquely personalized approach that takes each borrower?s situation into account.

All of these factors, and more, will be taken into consideration when you sit down with your personal mortgage consultant. He has been trained to understand what affects interest rates, which mortgage products are available as well as current economic conditions and, most importantly, he has been trained to use this knowledge as it applies to each client?s given status.

It takes years of study to understand the movement of interest rates and there are economists who specialize in only that. Here is what the layman needs to understand about the basics of interest rates: Interest rates follow an upward trend for a given period of time, they follow a downward trend for a given period of time, and the remain stable for a given period of time. We have seen this trending in action from 1950 to 1980 when interest rates were rising, from 1982 to 2003, when interest rates were falling and from 2003 to 2006 when interest rates stayed in a fairly narrow range. If you do not understand how this works, you will end up paying too much for your total mortgage costs.

In addition to the way interest rates fluctuate, interest rates follow certain unchangeable laws. 1. Interest rates follow the inflation rate. That is, increases in the consumer price index will lead to increases in interest rates. 2. Interest rates fluctuate according to the state of the economy. In a weak economy, interest rates will be lower and in a strong economy, interest rates will be higher.

The exact prediction of interest rates is next to impossible. We have seen interest rates increase over the last thirty years, with the average rate being 9.25%. Today, however, it is at about 5%. Perhaps at this interest rate level, you think it would be wisea good idea to consider a 5 year fixed mortgage. But if you had done that over the recent historic period, it would have been a disaster.

Which strategies do professional mortgage consultants look at? There are a number of basic strategies, and an informed mortgage broker will consider any of them, and even design a customized one that combines two or more.

Here are the basic mortgage strategies: *5 times 5-A fixed term five year mortgage, renewed 5 times. *Long term-a fixed rate mortgage for 15, 20 or 25 years. *Variable rate-a home loan with an interest rate that changes based on the Bank of Canada base rate. *Smith Maneuver-the borrower can deduct mortgage interest from income tax. *More retirement-the equity built up in a home is used to create retirement income. *No down payment-calculate the cost of renting while saving for a down payment as compared to taking a larger loan. *Less than perfect credit-use a loan to repair credit so a mortgage will be cheaper later.

The secret is to find the right strategy or mix of strategies for the client. In doing so, a mortgage broker can save a client a lot on the cost of the mortgage.

Your mortgage broker will explain each of these strategies and review if and how they would work in your own circumstances. He is also able to gauge the economic environment to help you make the right decision. If you want to choose the best mortgage strategy, make it your strategy to meet with a mortgage broker. A meeting that costs nothing may end up saving you thousands.

Gregory van Duyse is an Accredited Mortgage Professional (AMP). He is a Mortgage Broker for Mortgage Intelligence.

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