Be Mortgage Savvy in 2008

TORONTO, Jan. 22 /CNW/ - The Bank of Canada's decision today to cut its key interest rate by a quarter point comes at a time when a lot of Canadians are wondering how current trends in the overall economy will impact their bottom line. For most of us, our home is our biggest investment and many are reading the headlines wondering what, if anything, they should do with their mortgage.
Gary Siegle, regional manager with Invis suggests some helpful approaches for those who are thinking of buying real estate soon.
For homebuyers looking at getting a variable-rate mortgage, Siegle asserts that this is a good approach in the current interest rate environment. Variable rate mortgages have historically offered greater interest savings over the long term but require homeowners to keep an eye on interest rate trends.
Not sure if you should "lock in" your monthly payment? A variable-rate mortgage will allow you to monitor rates while having the option to convert to a fixed-rate mortgage at a later date.
For homebuyers wanting to go with a fixed rate, this is the mortgage strategy preferred by most borrowers (72 per cent according to a 2007 study by the Canadian Association of Accredited Mortgage Professionals), as it offers stability in a shifting interest rate environment.
Siegle notes that rates on fixed mortgages have been fairly steady in recent weeks, although he adds that mortgage shoppers can't go wrong with a mortgage pre-approval with a rate hold. "If rates drop, you'll benefit from the new, lower rate. If rates on fixed mortgages rise during the rate hold, you still have your original lower rate." A mortgage broker will often be able to obtain a rate hold for a 120 day period.