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By Amy Hoak, MarketWatch
Marketwatch | December 10, 2012
CHICAGO (MarketWatch)—Tempting low interest rates continue to make headlines, making refinancing your mortgage look attractive. But when retirement isn’t far off, the decision to refinance can get more complicated.
After all, most pre-retirees are trying to reduce debt before their last day of work, not extend the amount of time they’ll be on the hook for payments.
Still, for some homeowners with retirement on their minds, it makes sense to trade their higher mortgage rate for one near record lows, said Keith Gumbinger, vice president of HSH.com, a publisher of mortgage and consumer loan information. The money saved each month on your mortgage can be poured into other investments that could pay off in retirement, “whether that’s a 401(k) or IRA or cleaning up other debts,” he said.
If you haven’t refinanced in the past few years, your monthly savings can be substantial. The 30-year fixed-rate mortgage averaged 3.34% for the week ending Dec. 6, while the 15-year fixed-rate mortgage averaged 2.67%, according to Freddie Mac’s weekly survey of conforming rates. For those with a current mortgage rate near 5%, refinancing could mean significant improvement to their monthly cash flow.
Consider this: A homeowner who’s 52 today and who wants to retire at 70 bought a home in 2002 with a $250,000 mortgage. He refinanced at 5% in 2003. If he refinanced again into a 3.49%, 30-year fixed-rate mortgage, his payment would go down $415 a month, according to Gumbinger’s math.
The downside is the loan wouldn’t be retired until he is 82, and it would cost $3,432 more in interest over its lifetime than if he didn’t refinance.
To make that kind of trade-off work for you, it’s critical to ensure the increased cash flow is used productively.
“You have to be determined to save the money and invest it in something that would yield a higher rate of return than the interest rate you’re paying,” said Rich Arzaga, founder of Cornerstone Wealth Management in San Ramon, Calif. Conservative vehicles including corporate or municipal bonds—held long term—are a good option, he said. Money market accounts and certificates of deposit probably won’t cut it right now, with the paltry returns they’re paying out.
For others, the monthly cash flow may not be worth the hassle or the cost of a refinance, especially if the homeowner is close to the end of the mortgage term. At that point, the bulk of the payment is going to principal, said Tyler Vernon, president of Biltmore Capital Advisors in Princeton, N.J.
“Banks do that because they know that most people don’t have a mortgage for more than six years, so basically they’re paid mostly interest up front,” he said. But by the time the homeowner has five to 10 years left on a mortgage, he or she is paying much less interest, he said.
It’s helpful to talk out your own personal scenario with a financial planner before deciding to pull the trigger. But here are a few factors to consider prior to making a decision.
Your personal time frames
When doing your calculations, it’s important to consider how long you’ll stay in the home and when you plan on retiring. Knowing your goals is essential in making this financial decision.
For instance, if your goal is simply to increase cash flow and owning your home free and clear isn’t a priority, perhaps refinancing makes sense. Some people plan on downsizing when they retire or trading in their home for something more suitable, Gumbinger said. If you’re one of those people, the idea of refinancing might not be as frightening—you’ll be paying off that mortgage anyway when you sell your home.
But the time you’re planning on staying in the home shouldn’t be too short, since you’ll want to be there long enough to recoup the closing costs on the refinancing.
That said, if you’re planning on remaining in the home for good, with a goal of paying it off, you’ll have to seriously think about how you’ll pay the mortgage when you’re no longer bringing home a paycheck. And you may have no interest in lengthening the mortgage term into retirement.
How old you are will also be a big factor. “If you’re closer to 65, that’s a different scenario than if you’re 55 or 52,” Gumbinger said.
Time left on the existing mortgage
Regardless of your personal time frame, if you have 10 years or more left on the existing mortgage, there’s a chance it may make sense to refinance. With more than a decade to go, you’re not yet applying as much payment to principal, said Bill Losey, president of Bill Losey Retirement Solutions, based in Wilton, N.Y.
For those with less than 10 years on the loan, it’s a different situation, since more of your mortgage payment goes toward principal.
Furthermore, while lenders might offer a refinance product with a 10-year term, it will be difficult finding a mortgage with a shorter term than that, Gumbinger said. And if you’re near retirement, it’s unlikely you want to add another 20 years to your mortgage through a 30-year fixed product.
In the end, only you can decide how much risk you’re comfortable with.
“I always say, you want to enter retirement completely debt free, with the only exception potentially being your mortgage,” Losey said. “No one should have a mortgage past 70 tops, even at these historic low rates.”
Others see some upside to extending your mortgage. With a mortgage paid off in retirement, you may have more control of your expenses but it could be more difficult to tap home equity if you need it. For instance, there’s no guarantee reverse mortgage products will be available at some future date, Gumbinger said.
And you may not want to go that route anyway. Investments such as bonds and stocks that refund dividends are more liquid than your home equity, which could be helpful when those on a fixed income need cash—whether the reason is unexpected or not.
Either way, take a pass on mortgage life insurance, Gumbinger said. That’s a policy that offers more protection to the lender, who will receive funds in the event of your untimely demise, he said. You’re better off considering a standard term life policy instead; that way, the beneficiary has the freedom to do what he or she wishes with the proceeds—including, if he or she wishes, paying down the mortgage.
By Kathleen Biggins GENIUS COUNTRY
Tyler Vernon watched both planes fly into the World Trade Center on 9/11, one from his office at Merrill Lynch, and one as he was fleeing Manhattan.
Like many New Yorkers, he thought about what would have happened if the plane had veered slightly to the left and into his building, and began reevaluating his own path. While already a Vice President, he felt he was “grinding” through his work day, and after 9/11 he began to plan for a change of life, and a change of venue. But first, he changed his marital status, quickly becoming engaged to Molly, who he had been dating since meeting at the Subway Series in 2000.
Like Molly, Tyler had grown up on a farm. His father was a veterinarian who owned a vineyard in Tewksbury, NJ. Tyler loved rural settings and dirt roads, as well as great restaurants, theaters and clubs. Molly’s love of Princeton and The Stuart Country Day School swayed him towards the Princeton area. Because his father had worked such long hours, Tyler was committed to headquartering Biltmore Capital Advisors in Princeton and avoiding the commute to New York City so he could spend more time with his family.
Tyler’s approach to business is straight forward: work hard, do what you say, and do it when you say you are going to do it. He believes many people “don’t do the follow through,” even on the simple common courtesy things. Tyler follows this approach, but his success may be due in part to something else — his ability to deliver more than is expected.
When Tyler recounts how he got his first position on Wall Street, it is clear he has the buckle down, outperform mentality that helped him launch a successful new business.
As a college student attending Lafayette College in Easton, Pennsylvania, he realized engineering was not the right career path for him despite the fact math and science came easily. He wanted something more people centric, and like many ambitious young students, cast his eyes towards Wall Street. He felt handicapped as his family did not have personal contacts to help get an initial interview. He applied for an unpaid internship, but the hiring manager didn’t respond to multiple emails and calls. That didn’t stop Tyler. He hopped a bus for the two hour trip to Manhattan, walked into the World Financial Center and announced he was there to see the hiring manager who had ignored him. Not surprisingly, the manager was impressed and Tyler got the internship.
Perhaps equally telling, once he had secured the internship, Tyler did not let up. He made sure he was the first intern to arrive in the morning, awakening at 4:30 am every Friday during the school year, taking the bus two hours in and two hours back. During summers he continued with unpaid internships while working at restaurants at night and weekends to pay for his walk-in-closet sized apartment in Queens. ”I was pretty much working 24/7. But I knew that’s what I had to do. I had to create my own path,” he says with a shrug.
Tyler continues to buckle down and outperform. “Everyone calls themselves ‘Financial Advisors,’ including CPA’s and insurance brokers. We are looking for ways to set ourselves apart from the competition, thinking about what we can to do make clients lives easier, better, more confident in their investment and retirement plan,” he explains.
“The stock market has done nothing in ten years. We want to give people a new direction, a new way of living in retirement. Not the same old thinking about investing in stocks, but strategies to approach other markets,” he explains, adding with a smile, “Our approach is catching on quickly.”
Indeed. Biltmore Capital Advisors signed on its first clients in early 2008, right before the meltdown leading to the Great Recession. At a time when many financial firms were imploding, Biltmore Capital Advisors has been “catching on” — doubling its revenue in 2010 and growing 30% over each of the last two years, expanding to 15 employees, and opening offices in Dallas and Atlanta. In fact, most of its high net worth individual and institutional clients live outside of the Princeton area, something Tyler would like to change long term so he and his employees can stay off airplanes and closer to home.
To that end, Biltmore Capital Advisors has started to focus its marketing efforts in the tri-state area, and reaching out to make more local connections. Tyler has introduced clients from around the country to several local businesses, such as banks, mortgage companies and insurance firms. He is also holding events to showcase Biltmore Capital Advisors to local investors. The last one, held at the Nassau Club, was so popular invitees had to be turned away.
Tyler has grown to love Princeton, making good friends and reveling in the cooperative spirit among businesses here. In fact, Tyler believes personal relationships in Princeton helped his firm survive and thrive. As Biltmore Capital Advisors was launching in 2008, Tyler gave a presentation where he predicted the investment market was about to become “frothy” and advised investors to move towards cash. News of Tyler’s investing wisdom created buzz on Wall Street and newsmakers from Fox Business News and CNBC quickly asked him to share his investing insights with their international audiences. Tyler became a regular commentator on both business news networks, and Biltmore Capital Advisors‘ name recognition soared.
Not surprisingly, when asked to reflect on his own success and to provide advice for others, Tyler’s answer sounds a lot like Molly’s, “Find a passion, run with it, and it will all work out in the end.”
By Kaitlyn Kiernan 01/04/12 – 04:20 PM EST
NEW YORK (TheStreet) — The Dow Jones Industrial Average shot into positive territory Wednesday as commentary from the Federal Reserve on plans to shore up the U.S. housing market overshadowed European debt crisis concerns.
The turn higher came after the central bank sent a white paper to Congress calling for the federal government to take more action to stabilize the still-floundering U.S. housing market. The paper suggests “redeploying foreclosed homes as rental properties” as a possibility for combating an expected flood of foreclosures hitting the market and prompting another pricing swoon.
“Continued weakness in the housing market poses a significant barrier to a more vigorous economic recovery,” the paper said. In a letter to lawmakers on the Senate Banking and House Financial Services committees, Fed chairman Ben Bernanke wrote, “Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery.”
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Concerns about Europe’s sovereign debt crisis resurfaced Wednesday with early declines underlined by fresh worries that the situation in Spain is worsening. The Iberian country is considering applying for loans from the eurozone bailout fund and the International Monetary Fund to help the restructuring of its banking industry, the Spanish newspaper Expansion reported, citing anonymous sources.
Also, overnight deposits of commercial lenders hit a record high at the European Central Bank, suggesting that Europe’s banks remain incredibly cautious about lending to each other. Shares of UniCredit, Italy’s largest bank, sank 14.5% after the lender said it will sell $9.8 billion worth of new shares to boost capital.
Investors are also sensitive to rising borrowing costs in the eurozone with a France holding a bond auction on Thursday, and Italy and Spain about to sell debt next week.
Germany’s DAX lost 0.89% while London’s FTSE was down 0.55%. Overnight, Japan’s Nikkei Average settled 1.24% higher, and Hong Kong’s Hang Seng was down 0.8%.
“We are holding very neutral until we get some better volume trading and a better sense of what investors are going to do,” said David Ader, rates strategist at CRT Capital Group. “On the surface we have mixed to bearish technicals, better data and some degree of calm in Europe.”
The U.S., however, received another piece of positive economic data. The Commerce Department reported that U.S. factory orders rose 1.8% in November after a 0.4% fall in October, slightly beating the 1.7% forecast of economists polled by Thomson Reuters. Meanwhile, General Motors(GM_), Ford Motor(F_) and Chrysler Group beat analysts’ estimates for December car sales, with sales getting a boost from increasing consumer confidence and ads around the holiday season.
GM said that its December sales rose 5%, led by a 9% gain at Chevrolet. For the full year, GM sales rose 14%, to more than 2.5 million vehicles, and GM gained market share. Ford said that its car sales rose 10% last month and 11% for the year. Meanwhile, Chrysler’s sales jumped 37% in December. GM traded 0.5% higher while shares of Ford rose 1.5% on Wednesday.
In other corporate news, Yahoo!(YHOO_) tapped PayPal President Scott Thompson, who runs eBay’s (EBAY_) online payments unit. Yahoo! had been without a permanent CEO since firing Carol Bartz in September. Shares fell 3.1% to $15.78.
A big mover in afternoon trades was Eastman Kodak(EK_) following a report that the 132-year old company is preparing to file for bankruptcy in the “coming weeks if it fails to sell its patents. The report from The Wall Street Journal, which cited anonymous sources, comes after months of speculation that the company was preparing to take this step. Kodak shares tumbled 28% to 47 cents.
Jefferies Group’s(JEF_) executives and other employees at the company’s prime-brokerage unit threatened to leave the firm in a dispute over issues including a recent restructuring and year-end compensation, The Wall Street Journal reported, citing people familiar with the matter.
Jefferies executives and its global head of prime brokerage, Glen Dailey, reportedly held meetings Tuesday to discuss the issues but Dailey said that no one was leaving, adding that the “family affairs are now in order.” Jefferies in recent weeks has seen its stock under attack over its European exposure. Shares slipped 2.6% to $13.64.
Acme Packet(APKT_), a networking-equipment maker, lowered its outlook for the fourth quarter. The company, whose products include both hardware and software, now sees non-GAAP earnings of 26 cents to 28 cents a share for the three months ended Dec. 31 on revenue ranging from $84 million to $86 million. The current average estimate of analysts polled by Thomson Reuters is for a profit of 37 cents a share in the quarter on revenue of $93.4 million. Shares plunged 19% to $25.70.
With most of the day’s trading in negative territory stocks barely hung on to Tuesday’s strong New Year’s rally, which saw the S&P 500 index finish at its highest level since late October. The Dow, up 1.5%, closed at its highest since July 2011.
Analysts think that the S&P 500 will gain 6.6% by the year’s end, compared with a flat finish for 2011, according to polls by Reuters. Investors are now looking carefully at how stocks perform the first days into the new year, as track records show that positive momentum in January often translates into a bullish year overall.
“Transports and technology stocks could help the market in the beginning of the year,” noted Tim Ralph, portfolio manager at Biltmore Capital Advisors. Both sectors benefited from online shopping in the holiday, explained Ralph. “We could see strength here later this month and in early February.”
February oil futures settled up 26 cents to $103.25 a barrel, while February gold futures gained $12.20 at $1611.90.
The dollar index was up 0.5%. The benchmark 10-year Treasury was down 12/32, pushing the yield to 1.991%.
– Written by Kaitlyn Kiernan in New York.
November 23, 2011: 12:37 PM ET
An lackluster report on the U.S. job market added to the gloomy mood on Wall Street.
“You have a trifecta here — people may or may not be overreacting, but these are the things they are worrying about” said Tim Ralph, vice president at Biltmore Capital Advisors. “When you look at the U.S. you can see some signs of strength, but we’re going to continue to be shocked by the headlines from overseas.”
The Dow Jones industrial average (INDU) dropped 180 points, or 1.6%. The selling was broad, with all 30 components of the blue chip index losing ground. The S&P 500 (SPX) dropped 20 points, or 1.7%, and the Nasdaq (COMP) lost 47 points, or 1.9%.
Investors were rattled by a disappointing auction of German bonds. The debt of Europe’s largest and most healthy economy is often considered the gold standard of eurozone sovereign debt, and yields have managed to hold near record lows. But the dismal auction results raise concerns.
“The poor German auction plays to the grain that foreign investors are shying away from [eurozone] denominated bonds all together,” BNP Paribas said in a research note. “There are growing signs that the contagion from peripheral bond markets is moving to the core.”
The European Commission published a green paper on stability bonds Wednesday to help allay those worries, outlining proposals to fix the eurozone’s debt crisis. However, skepticism remains about how effective these plans will be.
Meanwhile, Chinese manufacturing activity fell to a 32-month low, heightening fears that the eurozone’s problems are spreading beyond Europe and added to worries about a global economic slowdown.
Stocks have taken a downward turn in recent sessions, as rising bond yields in Italy and Spain continue to shake investor confidence.
Stocks ended in the red Tuesday amid worries about U.S. economic growth, though losses were trimmed after the International Monetary Fund unveiled a beefed-up lending program to help otherwise healthy countries with short-term financing problems.
Asian markets ended in the red, after the report that showed Chinese manufacturing output fell to the lowest level since March 2009.
Economy: The government released several economic reports Wednesday including jobless claims, personal spending and income, and durable goods.
The number of people filing for initial unemployment benefits rose 2,000 in the latest week to 393,000. Analysts surveyed by Briefing.com expected 391,000 jobless claims for the week ending November 19.
Personal income climbed 0.4% in October, while personal spending grew 0.1%. Analysts had expected both measures to rise 0.3%.
Meanwhile, orders of durable goods slipped 0.7% in October — slightly less than the 0.9% drop economists had been expecting.
Companies: Bank of America (BAC, Fortune 500) shares slid 4%, and briefly touched the lowest level since March 2009, after a report in The Wall Street Journal on Tuesday stated the bank was having difficulty meeting U.S. financial regulatory requirements.
Late Tuesday, the Federal Reserve also ordered the top 31 U.S. banks — with assets of $50 billion or more — to participate in stress tests that will simulate another financial crisis.
Tests will simulate a more severe global financial meltdown for six banks with the largest trading operations: Bank of America, Goldman Sachs (GS, Fortune 500), Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Morgan Stanley (MS, Fortune 500) and Wells Fargo (WFC, Fortune 500).
Shares of many of those financial giants took a hit Wednesday. JPMorgan Chase, Citi and Morgan Stanley shares all dropped more than 2%.
Shares of Groupon (GRPN) tumbled 14%, to $17.20 a share — well below its initial public offering price of $20. The Internet deal site’s stock has been pummeled this week — along with other newly public startups like LinkedIn — on renewed dot-com bubble concerns and worries of overvaluation.
John Deere (DE, Fortune 500) reported full-year earnings that hit a record $2.8 billion, and posted fourth-quarter net income that blew past expectations. Shares of the equipment maker climbed more than 3%, making it one of the strongest performers in the S&P 500.
Oil for January delivery slipped $1.53 to $96.48 a barrel.
Gold futures for December delivery fell $13.20 to $1,689.20 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury edged slightly lower, pushing the yield up to 1.95% from 1.94% late Tuesday
- Biltmore Capital: UPS Options Strategies,
Thursday, July 28, 2011
In today’s Biltmore Capital Podcast, Chief Investment Officer, Tyler Vernon discusses the practical use of Covered Call and Puts writing strategies for UPS employees and retirees.
Biltmore Capital Advisors is a SEC Registered Investment Advisory firm with offices in Atlanta, Dallas, and Princeton. Biltmore caters to UPS executives and retirees nationwide. Besides offering HYPO rates at less than .80%*, we have the ability to lock rates for up to 30 years which may make sense with inflation on the horizon. The portfolio managers of Biltmore Capital Advisors have also designed proprietary strategies for UPSers designed to create extra income which can be used to pay down debt or fund retirement. Biltmore’s UPS strategy is also available on Fidelity’s platform for financial advisors who are looking for expertise for their UPS clients. If you aren’t a client already, please let us know if we can set up a call with a Biltmore Advisor in order to show you the platform that we’ve established for our UPSers or have your advisor contact us about how our strategies may fit into your overall financial planning.
To see recent appearances of Tyler Vernon on CNBC and Fox Business News, please visit our Media Center by clicking here.
For More information on our UPS Programs please visit here.
To schedule an appointment with a Biltmore Advisor please click here here.
Below we have included some research on the recent UPS Earnings for Q2 2011.
- Alliance Bernstein UPS Research Q2 Earnings 2011
- PiperJaffray UPS Research Q2 Earnings 2011
- JPMorgan UPS Research Q2 Earnings 2011
*Rates are subject to underwriting and qualification. Rates tied to LIBOR and change daily. Above rate is from July 29. 2011.