Personal Finance

Mortgage = Good Debt

Question on debt - I have a mortgage of about $250k which I can make the payments on OK.

Should I pay off the loan & get completely out of debt, or should I continue to make payments?

I'm nervous about the financial health of the country & I think being out of debt would be good. –- Gordon

Gordon: It's great to not want to be in any debt but it's also very important to maximize your IRA options rather than pre-paying your mortgage. Do that first - double up on a 401k and a Roth or traditional IRA. Your mortgage--if you have a good one and some equity--is good debt, remember that. Good luck! -- C

I've been laid off 3 times in a row and I have a poor credit score because of it. How can I get my credit in better standing? –- Kathy

Kathy: Your credit score isn't based on your employment but the management of your debts and other monthly bill payments. If your layoffs led to feeling financially strapped and some missed payments, etc., the best thing you can do now, if you are employed, is to get on top of your finances in such a way that you can set yourself so if you're ever laid off again, you have a cushion to pay your bills while you hunt for another job. Now I know this isn't easy, but set up a system to make all your payments on time every time and knock down as much as possible any credit card debt you have. You'll probably have to cut down on your spending or make some major life changes to do this and then save up a cash cushion but it will be temporary. The sacrifice will be well worth it - probably for the rest of your life!  -- C

Carmen- I saw your video last night about healthcare costs but got to my pen and paper too late. What were the names of the two sites you mentioned for ordering prescription medicines? I have been using but their prices have risen significantly. Thanks. -- Steve

Hi Steve: Those are two great sites to have in your shopping Even if you have insurance, try them out to compare prices on your prescriptions. Many insurers don't cover some non-generics and others have hefty co-pays dependent on the prescription cost. A nice example of shop around and save.  -- C

I have an question regarding mortgages. With ALL of the problems that borrowers are now facing, I was reading the that a local Developer, Century Homes, was STILL Offering adjustable mortages starting at 1.5/8 for the first year, and 60 year mortages. Is this legal? Who would be "dumb" enough to purchase a home with an ADR & for 60 years....It is like signing a DEATH Sentence. Is the 60 years legal????  -– Antonio, FL

Antonio: As far as I know, it is--that doesn't mean it should be! That is an obscene piece of lending and no one should ever sign up for a mortgage product like that. It's an example of the types of mortgages that brought down the system and as we've seen in the news lately, up to400 lenders who are now being criminally investigated are tied to mortgage lending. What we can do is spread the word to what's really a good mortgage and reject these offers for what they are--irresponsible and greedy. Head over to for more info on what's being done about shady mortgages.  --C

Here are a couple free forecloser sites. and   -- Jay, AZ

Posted on: 23 Jun 2008 3:29 A.M.

Hi Carmen,
I enjoy and appreciate all of the information you make available for us! However, as a mortgage professional with an advice based practice, I thought it relevant to add, that, there is not one certain product that "brought down the system". Ridiculously loose underwriting standards and program guidelines coupled with highly unqualified and unskilled loan officers focused on borrower ELIGIBILITY as opposed to borrower SUITABILITY, is at the core of this disaster. A mortgage is most often the largest financial transaction of a person's life and far too important to place into the hands of someone or the internet who is not capable of advising you properly. Different borrowers have different needs and different time horizons for accomplishing them, that said, there is no "one size fits all" mortgage solution. Now more than ever, I think the word we need to spread is just how critically important it is for consumers to be working with a qualified and experienced mortgage professional.

How can you tell? If they can't answer these 4 questions, immediately leave and find a lender who can!
1. What are mortgage interest rates based on? (hint: not the 10 year Treasury Note)
2. What is the next Economic Report or event that could cause interest rate movement? (a pro will have at fingertips)
3. When Bernake and the Fed "change rates" what does this mean and what impact does this have on mortgage interest rates?
4. What is happening in the market today and what do you see in the near future? (if they cannot explain how mortgage bonds and interest rates are moving now and near future; not good).

Everyone deserves to be working with a qualified mortgage professional, irrespective of loan size. Many excellent ones are out there and taking a long term relational approach to advising their mortgage clients. Let's face it, when Sen. Dodd can publicly excuse his VIP mortgage deal as a function of not knowing and only talking to someone at Countrywide a few times? Clearly, that doesn't sound much like a relationship with a trusted advisor, maybe this crisis is makng us all see the value and importance of that role in a borrower's life. Let's raise the standards!  -- Tracy, NJ

Posted on: 20 Jun 2008 8:21 P.M.