Establishing 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 probably 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 custom mortgage strategies for their clients - pret hypothecaire.

Why?

There are three good reasons:

1.Nobody knows 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 design 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 response is to analyze several factors in creating a mortgage strategy.

To choose the right mortgage strategy you must:

? know the all of the features of available mortgage products;

? identify your current position in the interest rate cycle; and

? evaluate the probability of an increase or decrease in rates over the next 10-15 years.

The interest rate cycles.

There are essentially three scenarios and two fundamental rules to understand interest rates (all this could take up several books, but we're going to keep it as simple as possible).

Scenarios:

1. Rates are generally increasing (1950-1980)

2. Rates are generally decreasing (1982-2003)

3. Rates are generally stable (2003-2006).

Each of these scenarios demands a particular strategy. It could be major disaster for you to adopt a strategy conceived for descending rates and then see them climb.

The two rules:

? Interest rates follow inflation. When the consumer price index goes up, rates increase and so on.

? Interest rates are linked to the economic situation in Canada and the United States. When everything is going well the rates increase, and when things aren't going well they decrease.

We can't predict the future of interest rates - pr'ts hypoth?caires. All we know is that the average interest rate over the last 30 years is 9.26% and that now it is approaching 5%.

What are the different strategies?

There are several basic strategies, each possibly consisting of several options, and it is often advantageous to combine two strategies to take advantage of the market.

All this to say that it is better to consult an accredited mortgage professional.

Here are the basic mortgage strategies:

1. The 5 times 5: a mortgage is continually renewed every five years for a five year term.

2. Long term: the rate is fixed on a mortgage for 15, 20 or 25 years.

3. Variable rate: the interest rate changes over the life of the loan, based on the Bank of Canada base rate.

4. The Smith Maneuver: the borrower can deduct the interest paid on a loan for a private residence from his income tax. This applies to both salaried or self employed individuals.

5. Retirement: Using the home equity as retirement income.

6. No down payment: by calculating the savings, you decide whether it may be better to buy a house sooner without a 5% down payment, rather than later while accumulating the down payment and paying rent in the meantime.

7. Less than perfect credit: The borrower fixes his credit rating in order to obtain lower eventual mortgage rates.

By comparing these strategies you will learn to appreciate what a good mortgage strategy (pret hypothecaire) can do, and enjoy savings over the entire life of your mortgage.

Don't forget that a good strategy is 21 times more important than simply negotiating the best interest rate.

Each strategy deserves its own personal analysis and should be coupled with your long-term objectives and the current state of the Canadian 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.