Mortgages and Refinancing Your Home

NBCi presents

July 01, 1999

Financial Planner Kevin Ellman, from the Lincoln Financial Group, answers questions about mortgages and refinancing your home.

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CNBC: Welcome to CNBC.com's MoneyTalk Live! Our guest today is Financial Planner Kevin Ellman from Lincoln Financial Group. Kevin is here to talk about Mortgages and Home Refinancing in light the Federal Reserve's decision to raise interest rates.

Kevin Ellman: Even though rates seem to be moving back up, I think the basics of financing a home remain the same. It makes sense to consider refinancing when you can save at least 1% on your debt, or to refinance other loans like auto loans or credit cards, or to take some equity out of your home, for things like college expenses. You might consider refinancing to improve your term, or if you're in an adjustable mortgage or would feel more comfortable with a fixed rate.

Rate Hike Happy: I hear all about the effect of interest rates on the housing market, but does really have any effect on ability to get a decent mortgage?

Kevin Ellman: It definitely has an effect on the speed at which you can get a good mortgage. Last year when the rates were in the 6% range all the mortgage companies were flooded with applications, and the process slowed down. It might be a little easier now. The main thing that determines how easy or hard it is to get a mortgage is your own credit rating.

Rachel: Kevin, I'm building my house now. I couldn't lock the rate 60 days before the house is built. I already choose 7ARM mortgage plan. Should I lock now?

Kevin Ellman: If it were my money, I would lock the rate in now. I think a seven year adjustable - a compromise between a 1 year adjustable and a 15 year fixed. If you're working with a really competitive investor, they might let you float down if the rates drop below that point. So you might ask for that feature.

Godzilla: My friend just locked in his mortgage yesterday. Should he have waited? Do you think rates will float down a little bit?

Kevin Ellman: Well, if I could really predict the future, I'd be a gazillionaire! Personally I think he made a good move.

Korky: Can I lock in interest rate if I plan to build a new home in 2 to 3 years? I have 25% the down payment now but we want to double that before we start construction.

Kevin Ellman: Unfortunately, I don't believe you can do that. The best action you can take now is to continue to build up your down payment, and make sure to keep your credit standing strong.

TM: Are there any government programs that give grants to single fathers, (parents) like myself?

Kevin Ellman: I'm not aware of any, but there may be programs that I don't know about. I would start out on the website bankrate.com - they seem to have links to all the other programs.

House Dad: Kevin, we paid off our mortgage a couple of years ago. Should I borrow against the equity (about $275,000) and invest in the stock market, or just sit tight?

Kevin Ellman: That depends on whether or not you're retired, and whether or not you enjoy sleeping at night! If you're retired or close to retirement, I recommend being debt-free. If you're more than 10 years away from retirement, it's up to you whether you think you'll do better in real estate, or in the market. I'm in my 40s, and I'd go for the stock market. The ultimate test is the sleep factor; whether you can sleep at night watching the market go up and down.

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