Make sure you choose the right mortgage strategy for you.  You will be surprisedat  how much you will save if you concentrate on the right mortgage strategy (hypothèque), 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.)

How do you find the right mortgage strategy? You can’t. You have to join forces with 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 have a complete understanding of 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 consultant.

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 (prêts hypothécaires) 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.

It takes years of study to understand the fluctuations 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 certain period of time, they follow a downward trend for a given period of time, and the remain stable for a certain 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 are not familiar with how this works, you will end up paying too much for your total mortgage costs.

Interest rates follow two rules, one, that interest rates are indicative of the inflation rate, and two, that interest rates are closely linked to the economic performance of a country. What does this mean? If the inflation rate(the consumer price index) goes up, rates will go up, if the economy is strong, interest rates will go up. (Of course, the opposites are also true.)

Predicting interest rates is nearly impossible. Over the last thirty years interest rates have increased, averaging 9.25%, but recently have been decreasing and are now approaching 5%.  At this level, you may have considered a fixed rate mortgage for five years. But that strategy has been the most costly over the past decades.

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

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.

Using the correct one of these strategies in each individual case is what it is all about. Using the right mortgage strategy (taux hypothecaire) is 21 times more important than getting a better interest rate.

That’s what a mortgage expert will do when he meets with a client. Each person’s individual needs and goals 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 consultant (Intelligence Hypothécaire) can result in paying too much. A consultation is free, not having a consultation is very expensive.