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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.)

What’s the correct mortgage strategy? Well, you probably can’t answer that question for yourself. What you can do is consult a mortgage broker 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.

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.

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 given period of time, they follow a downward trend for a given period of time, and the remain stable for a given 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.

In addition to the way interest rates move, interest rates follow certain unchangeable 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 recent 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)
-Fix 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 case is what a mortgage broker will do in order to save mortgage expenses, sometime as much as 20 times or more, over the life of the loan.

That’s what a mortgage broker 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 consultant can result in paying too much. A consultation is free, not having a consultation is very expensive.

Gregory van Duyse is an Accredited Mortgage Professional (AMP). He is a Mortgage Broker for Mortgage Intelligence.