The “5 x 5” home loan strategy (hypotheque) - (Renew 5 year fixed loan 5 times)
Why the “5 by 5” (5 ans fixe) mortgage strategy (renewing a fixed rated five year mortgage five times)?
This strategy is a common mortgage strategy, probably the most common in Canada, though not in the rest of the developed world.
As a matter of fact, many people think that this is the way all mortgages are designed, and that the only choice they have in a mortgage is to try to get the best interest rate.
Why is this strategy (terme 5 ans fixe) so popular? It’s difficult to say; but perhaps because it is the same strategy that we are accustomed to and that our parents and everyone else we know has. Besides this, the big banks advertise this strategy the most, probably because it is the most advantageous for them. You can be sure if it is beneficial for them it is not beneficial for you!
Description
What exactly is the “5 by 5” strategy? As you may be able to tell from the name, it means you take a mortgage out on your home for five years, at a fixed rate, and then you renew it at the end of the five year period.
If you visit any lender or call any mortgage consultant and ask for the best mortgage rate available, they will automatically give you the rate for the five year fixed rate mortgage, even if you did not specify that kind of loan.
Advantages
-Available all mortgage lenders
-A lot of competition for this interest rate
-Payments do not change for 5 years
-The strategy is very easy to understand
-No adjustment in interest rate until the end of the term

Disadvantages
•At the maturity of the loan, you will have a new current rate, and you have to renew at that rate
•The possibility exists that you will have a major increase in mortgage payments every five years
•If you try to pay your mortgage down before the maturity date, there will be stiff fines

Is there a case when the “5 by 5” strategy does pay?
Yes, if you think that interest rates – taux hypothecaire - will be lower at the end of the five year period. However, the chances of interest rates being lower at the very time that you need to renew your loan would be very coincidental.
If you believe that interest rates will be higher at the end of the five year term of your loan, the strategy you should choose is the long term strategy. If you believe that rates will be stable, or go down, you should choose the variable rate strategy. And, if you are like most borrowers and are not sure which way interest rates are going, there is a strategy for you as well. (Get in touch with us and we can explain this to you.)
If you know for a fact that you will be moving in exactly five years, or if you know you want to refinance your homein exactly five years, or if only five years remain on your loan, the “5 by 5” strategy may be the one for you.
Be sure that you do not choose your mortgage just because it is like everyone else’s home loan or because it is the only one your bank makes available to you. Make sure you examine all of the home loan options available to you, and that you work with a mortgage – hypotheque - consultant who understands and can present the different choices to you.
It’s your choice!

Gregory writes articles for http://www.informezvous.com/ - Pret hypothecaire. To have more information about mortgages, please visit one of his websites:
http://www.informezvous.com.com


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Compare loans – A critical analysis of secured and unsecured loans
Loaning is a flourishing business... The credit bazaar is brimming with loan types and offers. Today, one can find an array of loan forms according to their usage - debt consolidation loans, bad credit loans, wedding loans, vacation loans, education loans, business loans, vehicle loans, homeowner loans, tenant loans and many more. Irrespective of the reason, all these loans are broadly categorised as:
Secured loans
Unsecured loans
So, how should one compare and decide which category would be most advantageous? The core difference between secured and unsecured loan is the presence and absence of collateral respectively. Other key elements that make a deal advantageous or disadvantageous are the borrower’s:
Credit history and existing financial standing
Loan requirement and preference
Please note that before you compare loans, you must have a clear idea of your requirement, and past and present financial state.
For a secured loan, the borrower needs to offer something valuable as collateral. Depending upon the value of the furnished collateral, a secured deal ensures:
High amount - as high as £75,000 and more
Low APR (varies from 7.9% to 19.9%) - nominal rate + loan processing charges
Extended repayment terms - as long as twenty-five years
Negotiable payback rules - grace period or payment holidays or early pay offs
Flexible and easy loan clauses - hidden charges, penalties and extra benefits like the Payment Protection Plan (PPI)
The only disadvantages of a secured deal are:
Slow loan approval - lender needs to evaluate the pledged collateral to decide the loan terms
Collateral seizure - in case of a repeated default, the lender can take over the pledged asset

For an unsecured loan, the loan seeker does not need to offer his asset as security against the loan amount. The absence of collateral ensures:
Swift loan approval - lender simply evaluates the loan seeker's credit history and future payback ability
Less risks - no threat of property seizure by the lender in the event of a default
The only disadvantages of an unsecured deal are:
Comparatively high APR (varies from 7.4% to 41%) - nominal rate + loan processing charges
Usually non-negotiable payback rules and firm loan clauses
Based on the above-mentioned comparative analysis, we can say that secured loans are appropriate when the monetary requirement is big and the loan seeker is not hesitant to pledge his asset. Unsecured loans, on the other hand, are suitable for people who have nothing substantial to pledge (tenants) and for those who do not wish to risk their priced asset (homeowners). In addition, they are good for those loans seekers who have small or immediate monetary requirements, as the procedure is fast and simple.
For more information please visit at http://www.shakespearefinance.co.uk/