Search:

How to beat the lowest home loan rates(taux hypothécaire)

Make sure you choose the right mortgage strategy for you. You will be amazedat how much you will save if you concentrate on the right mortgage strategy, rather than concentrating on finding the lowest interest rate. Differences in interest rates are peanuts compared to the tens of thousands of dollars you will save with the right mortgage strategy. (Read How to beat the best rate! to see how this works.)

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.

With the expertise of an experienced mortgage broker, the two of you can sit down and design the exact product that will work for you. You see, he has special training to know and understand each of the mortgage products on the market, and know how each one would apply in a given set of circumstances. In addition, he understands the economy in general and probable impact of interest rate trends over the projected life of your mortgage.

To completely understand interest rates would take a lifetime of academic study, but there are basically three interest rate situations and two rules that interest rates follow.
Situations:
Interest rates trend higher. (This was the situation from 1950 to 1980.)
Interest rates trend lower. (This was the situation from 1982 to 2003.)
Interest rates stay in a narrow range. (This was the situation from 2003 to 2006.)
If you don’t understand these trends and use the wrong strategy, you could end up paying as much as 20 times more in mortgage costs over the life of the mortgage.

In addition to the way interest rates fluctuate, interest rates follow certain immutable 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.

Trying to predict interest rates is next to impossible. Interest rates over the last thirty years averaged 9.26%, whereas they are now at about 5%. With this rate, you may choose to take out a 5 year fixed rate mortgage. Remember, by doing so, even without realizing it, you have chosen a mortgage strategy, and this one could be a disastrous one. Refinancing every five years in an increasing interest rate environment would have cost a fortune.

There are quite a few mortgage strategies that mortgage brokers have to choose from. An expert mortgage professional can pick and choose from this mixed bag of strategies and design the perfect one for you.

He may decide among the following strategies:
A five year fixed term loan that is renewed every five years.
A fixed rate loan for 10, 20 or 25 years
A variable rate loan based on the Bank of Canada base rate.
Using the Smith Maneuver where the borrower can deduct interest from income tax.
Using the equity in a residence to supplement retirement income.
Calculate the cost differences between renting while saving for a down payment, or opting for a no down payment loan.
Using a loan to improve a credit score for an eventually cheaper loan.

Good mortgage planning and finding the right mortgage strategy in each situation is what a mortgage broker will do in order to save home loan expenses, sometime as much as 20 times or more, over the life of the loan.

That’s what a mortgage expert will do when he meets with a client. Each person’s individual requirements and dreams are discussed, and then any mortgage strategies that may be open to him are applied to his situation, under the present and anticipated economic conditions. Not taking these steps with a professional mortgage broker can result in paying too much. A consultation is free, not having a consultation is very expensive.