How Do You Choose The Right Loan Strategy To Suit Your Situation? (pret Hypothecaire)

By Author: Gregory van Duyse
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Choosing your home loan strategy - prêt hypothécaire

A good home loan strategy canl save you a lot of money: thousands and even tens of thousands of dollars on a $100,000 mortgage.

That's a lot of money.

We will now take the time to answer a major question :

How do I choose the right mortgage strategy?

The easy answer: contact a mortgage specialist who specializes in creating a unique mortgage strategy 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 take into account the current and future economic context.
3.One has to customize it according to your objectives and personal situation.

All this is not easy, 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.

No one can help you choose the mortgage strategy for you unless he has intimate knowledge of each mortgage strategy that is available ...
... (both the good points and the bad points), can calculate where you stand in the interest rate cycle and can make an educated guess about the interest rate directions over the next decade.

Volumes and volumes have been written about interest rates, interest rate cycles and the economy in general and it is a complex subject. A basic synopsis of historic interest rates is as follows:
-There was a general upward trend in interest rates between 1950 and 1980.
-There was a general downward trend in interest rates between 1982 and 2003.
-Interest rates have remained fairly flat from 2003 to 2006.
If you didn't understand that interest rates follow a trend, you would not have been able to design successful interest rate strategies. Designing an interest rate strategy meant for falling interest rates when the rates are trending upward will spell disaster.

The two rules:
Interest rates follow 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 aren't going well they decrease.

Nobody knows 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%.

What are the different strategies?

There are several basic strategies, each able to be combined with several options, and it is often advantageous to combine two strategies to take advantage of the market.
All this to say that you really need to consult an accredited mortgage professional.

Here are the basic mortgage strategies:
1. The 5 times 5: a mortgage is continually renewed every five years for a five year term.
2. Long term: the rate is fixed on a mortgage for 15, 20 or 25 years.
3. Variable rate: the interest rate changes over the life of the loan, based on the Bank of Canada base rate.
4. The Smith Maneuver: the borrower can deduct the interest paid on a loan for a private residence from his income tax. This applies to both salaried or self employed individuals.
5. Retirement: Using the equity in the home as retirement income.
6. No down payment: by calculating the savings, you decide whether it may be better to buy a house sooner without a 5% down payment, rather than later while accumulating the down payment and paying rent in the meantime.
7. Less than perfect credit: The borrower fixes his credit rating in order to obtain lower eventual mortgage rates.

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 home loan.
This what it means when it is said that a good loan strategy is so much more valuable 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.

All of this points to only one thing-you really need a professional who is looking out for your best interests in order to find the perfect mortgage loan strategy. The advantage of this approach is that you will learn a lot about your situation and the economy, and this education is all free!