How To Save Money On Your Home Loan(prt Hypothcaire)

Make sure you choose the right home loan strategy for you. You will be surprisedat 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 pennies 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.)

How do you find the right mortgage strategy? You can't. You have to enlist the help of a professional who can create the strategy for you. Why is this? First, you don't know where interest rates are going in Canada. Second, you have to fully understand current and future economic factors. And thirdly, you need to design a strategy that is individualized. For all of this, you need a professional mortgage specialist.

You see, a professional mortgage consultant has the ability to conduct an in-depth analysis of various options that may or may not suit you. To do this, he has been trained to understand all of the mortgage products available and to choose which one is right in a given situation. In addition, he knows where we are in an interest rate cycle and he can make a better judgement of the probable movement of interest rates over the next ten to fifteen years.

To completely understand interest rates would take a lifetime of professional 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 small 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 move, 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.

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 wise\a good idea to consider a 5 year fixed mortgage. But if you had done that over the prior historic period, it would have been a disaster.

Mortgage consultants have a number of mortgage strategies that they structure and customize for each client. A professional such as this will look at each option and find the right one for his customer.

The basic mortgage strategies are:
-A five year fixed term loan, renewed five times (5 times 5)
- A 15, 20 or 25 year fixed rate mortgage (Long term).
-A mortgage with an interest rate that varies, based on the Bank of Canada base rate. (Variable rate)
-Deduct interest paid on the mortgage from personal income tax (Smith Maneuver)
-Use the equity in the residence to add to retirement income. (More retirement)
-Calculate the difference between saving for a 5% down payment while paying rent and taking out a larger loan and avoiding rent during that period.(No down payment)
-Repair credit using a mortgage in order to establish better credit later on. (Less than perfect credit)

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.

Analyzing each of these strategies on its own is important, and then the borrower's individual circumstances must be considered, as well as the general economy of the country. Not using a professional mortgage expert to do these analyses can be dangerous and expensive. The best decision you can make is to contact a mortgage broker to assist you; this free consultation may be worth a fortune!

How To Save Money On Your Home Loan(prt Hypothcaire)

Recent Finance Articles

Comments