How to choose the loan strategy that is best for you? - prêts hypothécaires

Finding the right mortgage strategy (pret hypothecaire) can mean a lot to you in the long run. It can save you thousands of dollars over the life of the mortgage loan; on a $100,000 mortgage, it can easily mean as much as $10,000 in total. What you really want to be doing, instead of shopping for the best mortgage rates is something entirely different.

How to choose the right mortgage strategy?

The easy answer: contact a mortgage consultant who specializes in creating a unique mortgage strategy for their clients - pret hypothecaire.

Why?

There are three good reasons: 1.We can’t predict 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 the client’s objectives and personal situation.

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

But let’s not stop there.

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

An expert such as this will understand each strategy that exists and how it should be applied, will know how to properly put together strategies in the best way to serve the borrower, will know about the economy and interest rate cycles and how they will affect the chosen strategy.

Volumes and volumes have been written about interest rates, interest rate cycles and the economic climate 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.

Interest rates roughly follow two basic rules:

-They will more or less follow the inflation rate. If the inflation rate, as measured by the consumer price index increases, we should look for\expect an increase in interest rates. -They are indicative of the health of the economy. In a strong economy, interest rates will tend to rise since money is in demand, and interest rates are the price of money. In a weak economy, demand for money is low and therefore interest rates are lower.

It is impossible to predict interest rates 100% accurately, but we can observe that interest rates were 9.6% on average over the last thirty years, and they are now about 5% - pret hypothecaire.

There are a few basic mortgage strategies available, and then combinations of each of them that yield us a variety of options. Picking the right strategy or combination of strategies is critical to choosing the right mortgage package for each borrower. Only an accredited mortgage broker has the experience and expertise to do this for each borrower.

The basic mortgage strategies:

• 5 times 5 – renew a mortgage five times with a fixed term of five years. • Long-term – a fixed-rate mortgage for 15, 18, or 25 years. • Variable rate – mortgage whose rate changes with the base rate of the Bank of Canada. • ‘Smith Maneuver’ and the cash flow dam – a strategy that allows you to eventually deduct interest paid on a private house from your personal taxes (salaried or self-employed worker). • More retirement – an efficient manner of using the equity in your home to supplement retirement income. • No down payment – This strategy allows one to estimate the savings and purchase a home right away without a down payment, rather than rent an apartment while you accumulate the minimum down payment of 5%. • Less than perfect credit – help repair a poor credit rating in order to obtain an excellent rate in the future.

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 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.

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.

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