Friday, May 1, 2009
In This Issue:
Is the Economy Stabilizing?,
Monthly Contest Winner,
Paying Off Your Mortgage Early
Is the Economy Stabilizing?
There are definite indications that the U.S. economy is stabilizing. Wells Fargo is expecting record first quarter earnings of approximately $3 billion, and retailers are predicting solid sales during the month of April. There was also a drop in unemployment filings, though the national unemployment rate remained at 8.5%.
Lawrence Summers, President Barack Obama’s top economic advisor stated, “The sense of a ball falling off a table, which is what the economy has felt like since the middle of last fall, I think we can be reasonably confident that that is going to end within the next few months, and we will no longer have that sense of a free-fall."
In addition, President Barack Obama stated in an April 10th speech that there are “glimmers of hope across the economy.” This was primarily due to refinancing of home mortgages, stimulus package monies, and an increase in government-backed loans to small businesses.
Even with promising signs, it will take some time for the U.S. to lift out of recession mode. Job losses and their potential are keeping consumer confidence low. Most economists agree that the economy won’t begin to grow until the final quarter of 2009, at the earliest, and unemployment is expected to reach 10%. History has shown that the jobless rate continues to rise after a recession ends, because companies don’t want to hire until they are confident the economy has stabilized.
At the very least, economists believe that the worst part of the recession is over. They do, however, caution that the economy is still in turmoil, and it will take some time for the markets to stabilize and the economy to even out.
Do you have an update to share with us? Did you get promoted, have a new addition to your family or any other news you’d like to share? Click here to tell us about it.
Paying Off Your Mortgage Early
Despite the current housing crisis, 93% of Americans are still paying their mortgages on time. In fact, many homeowners may even be considering paying off their mortgage early. Some people might view paying off your mortgage early as unwise, but many financial analysts disagree. Homeowners might believe that if they invest their extra money into a bank or money market fund with average earnings of 3-6% is smarter than paying extra mortgage payments.
However analysts say they are mistaken. Why? The return on prepaying the mortgage is the interest rate itself. The average mortgage rate is around 5.5% and contains zero risk since you are basically paying yourself.
Analysts clearly recognize that diversified investments in the stock market can yield more than 5.5%, but the investor must be willing to take the risk of losses that come with stock market fluctuations. Analysts suggest the higher risk options for younger investors. Those closer to retirement should consider early mortgage payoff.
Financial guru Suze Orman gives the following example: “Add one more (payment) per year to a 30-year fixed-rate mortgage, and you cut about five years off the payback period. On a $200,000 mortgage, you would also reduce your total interest payment from more than $250,000 to just $196,000, assuming a 6.4 % interest rate.”
Homeowners might also worry about losing their “tax breaks”. However, analysts say most tax break benefits will be earned early in the mortgage. Towards the middle and end of a mortgage, the benefits become smaller. The long-term advantages of early repayment far exceed the tax benefits.
If you are going to send in extra monthly payments, make sure your lender is not applying those supplemental dollars to the interest. Also be sure that there are no prepayment penalties in your mortgage contract. You will want to consider any penalties in your plan.
Congratulations to this Month's Winner
Network with Orion
Are you LinkedIn to Orion International's Alumni Group? Our LinkedIn group allows Alumni to keep in touch with Orion and fellow alumni that have been placed through Orion International.
here to join Orion International's Alumni Group today.
Orion is on Facebook. Check out our page for links of interest, pertinent discussions, Orion news and stay in touch with Orion and other Orion Alumni. We’d love to have you as a fan!