Find the right mortgage

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(NC)-Financing a house is probably one of the largest debts you will incur in your lifetime. Here are some tips to help you to make a sound decision when you go mortgage shopping, courtesy of the Institute of Chartered Accountants of Ontario:

Where to start

"Check your own financial institution," advises Chartered Accountant John Durland, Tax Partner with Collins Barrow, Region of Waterloo. "Your banker knows your financial situation and credit rating. Do your homework - banks have a wealth of information on their websites. Or, a licenced mortgage broker will assess your needs and find you the best deal."

"Don't overlook the unconventional sources," says Toronto Chartered Accountant David Trahair, author of Smoke and Mirrors: Financial Myths That Will Ruin Your Retirement Dreams. "These include companies like ING Direct, Manulife Bank, President's Choice Financial and Canadian Tire Bank. A reliable source to easily compare rates is Fiscal Agents Financial Service Group (www.fiscalagents.com)."

Different types of mortgages

Basic mortgages include fixed rate and variable rate. Trahair explains that fixed rate mortgages can be open, which means they can be paid off any time, locked in for a longer term, or changed to a different type of mortgage.

Convertible mortgages can be locked in for a longer term or changed to a different type of mortgage, while closed mortgages have a fixed interest rate for the term of the mortgage - usually six months to 10 years.

Variable rate mortgages have interest rates that change with fluctuations in the money market and can be open, convertible, protected (the rate is capped for the term of the mortgage), or high ratio (allowing a down payment as low as 5 per cent and requiring insurance).

Mortgages and financial planning

Make your mortgage decision part of a financial plan. Paying off your mortgage and saving for retirement are important components of any good financial plan.

"Determine your goals," says Durland. "When do you want to be debt free? A longer amortization period may make sense as long as you are also building up other savings such as an RRSP.

Banks often recommend bi-monthly payments to save interest. Look at your overall cash flow first - paying down your mortgage faster may not make sense if this means you cannot pay off other debts, including credit cards."

Should I shop for the best interest rate?

"Yes!" Trahair says. A review of Fiscal Agents Financial Service Group's mortgage rates (available on their website and every Sunday in the Toronto Star) showed five-year closed mortgage rates ranging from 5.69 per cent to 7.25 per cent. "Choosing the lower rate on a $200,000 mortgage over the five-year term amortized over 25 years would save you approximately $15,111 - a lot of money saved with very little effort."

"Rates are a betting game," adds Durland. "Don't automatically assume the bank will give you the best rate - always ask for a discount. If you don't ask, you don't get." From: www.newscanada.com