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By HELEN HUNTLEY

© St. Petersburg Times, published May 20, 2001

When refinancing mortgage, consider reputation

Q. We are getting ready to refinance our mortgage. Is it better to deal with a mortgage broker or to go directly to a lender?

A. Mortgage brokers may be able to find a lower rate than the local bank offers but may not have as strong a track record. You want to deal with a company that offers both good deals and a good reputation for delivering as promised. The best advice is to shop around.

"Competitiveness varies from lender to lender," said Bob Cabrera, regional mortgage manager for AmSouth Bank. "Sometimes you will have one lender a little hungrier than another."

You can get a feel for current mortgage rates by checking out Web sites such as www.bankrate.com. Then ask other borrowers, real estate agents and title company employees about their experiences with mortgage brokers and lenders. You should come up with some recommended names and perhaps some that are definitely not recommended. Call those that get favorable reviews and ask for their current rates, lock-in periods for which the rates will be guaranteed and a good faith estimate of costs for a mortgage of the size and type you want. Get everything in writing so you can make good comparisons.

Shopping around for the best rate should not hurt your credit score. Fair, Isaac & Co., the source for FICO scores, said its system ignores mortgage loan inquiries for the most recent 30-day period. For earlier inquiries, it lumps together all mortgage and car loan inquiries during any two-week period, considering them as one inquiry.

Q. My husband and I recently retired. We are in good shape financially, living on our pensions and Social Security, with long-term care insurance and a home that's just about paid for. We have $130,000 in stocks and $95,000 in tax-sheltered annuities. Recently, a financial planner suggested we roll over the annuities to IRA mutual funds that would earn a higher return. I checked the funds he recommended and think they are reputable, but they all have an upfront fee of 3.8 percent. We realize there are funds out there that have no load. The bigger problem is that the annuities all have surrender charges, which would add up to about $8,000. The financial planner thinks that in 10 years we will more than make up these fees by having our money in better-paying funds. What would you do in our situation?

A. I would start by checking out the terms of my annuity. Those kind of surrender charges strike me as robbery, but maybe the situation is not quite as bad as it appears. Here is what you need to ask:

Can you withdraw a certain percentage of your account or at least your investment earnings each year without a surrender penalty? If so, you could do a gradual rollover, transferring money out each year.

Do you have other investment options with the same insurance company? If you could change investments without triggering the surrender penalty, that could be a temporary or permanent solution.

How long does the surrender charge apply? If it gradually goes away, you may want to stick with the annuity until it has diminished or disappeared. If it never goes away and you have no better investment options with the company, you might as well bite the bullet and take the charge now.

If you use a financial planner, expect to pay for the advice you get. But you do have other alternatives. Now that you are retired, you have time to read and educate yourself about investments and can save some money by investing in low-cost funds with no sales commission.

Online Money Map

How can you tell when a stock's a good buy? Some analysts look at the PEG Ratio. What's that? First you figure out the PE Ratio (price per share divided by earnings per share), then divide the PE ratio by the year-over-year earnings growth rate. If you look at a chart of the PEG Ratio over time, you can tell whether the current price is a relative bargain or not. If calculating it yourself sounds like too much work, check out MarketPlayer.com, which claims to be the first on the Internet to offer historical PEG ratios. Click on "quotes and research," then "charts," and select "price and PEG" as the chart type.

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731, or to huntley@sptimes.com by e-mail.

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