Community Magazine March 2009

Take the Points Now When interest rates were high, paying “points” – one-time up-front fees to reduce the interest rate on a mortgage – didn’t necessarily pay since borrowers were likely to refinance after rates dropped, and thus wouldn’t hold their original loans long enough to recoup their up-front costs. But now, borrowers can get a lot more bang for their buck. Paying one point (which represents one percent of the mortgage value) at closing used to lower mortgage’s interest rates by approximately ¼ of a percent- age; today, one point can lower interest rates anywhere from ½ to a full 1%. For example: one point on a $500,000 mortgage at closing ($5,000) can save as much as a ¾ of a percentage point off the loan’s interest rate, changing a 5.5 percent loan to 4.75 percent. That would save $231 a month, and pay for itself in approxi- mately 18 months. Of course, there are caveats. Buyers who are planning to sell within a few years shouldn’t pay points, since the strategy simpl y doesn’t pay in the short term . Larry Aboudi, Senior Mortgage Consultant for GFI Mortgage Bankers Upgrade to Lower Cost s The old “If it ain’t broke, don’t fix it” philosophy may not be such a wise course in difficult economic times. By simply improving and updating existing practices and programs, busi- nesses can run with greater efficiency and at lower costs. Upgrades can include: Outdated computer systems • Old, inefficient printers • Contracts negotiated over a year ago: EDI (electronic • data interchange), phone, freight, equipment leases, etc. Many simple, easily applied solutions can save hours of manpower and greatly improve accuracy. For example, new printing equipment could eliminate the frustration of frequent breakdowns and even save you money on supplies starting from the first month. Experienced consultants who know the industry and technol- ogy can prove valuable during these difficult times. Most compa- nies have already looked at the obvious cost factors; now is the time to analyze the less obvious cost factors. Hal Husney , Superior Development Center of NY It’s Your Busine $$ Do you have a killer business or personal finance tip? Send your contributions to business@communitym.com Invest in Human Capital Good employees are a compa- ny’s greatest asset and so astute business owners are constantly looking to increase the value of their human resources. In a tough economy, while many companies are downsizing, those with a sustainable business model have a unique opportunity to get their pick of prime candidates at bargain rates. The number of intel- ligent, hardworking and productive people who are out of work today is unprecedented. Many, are even superstars who find themselves jobless only because their companies were ensnared in Wall Streets’ financial meltdown. Hiring talent is a long term investment and only companies that can ride out the downturn can employ such a strategy. But for those who do, the upside potential is tremendous. Secure the Future of Your Business Do you have key employees or family members who could step in and run your business in the event of an unexpected disability or death, Gd forbid? A succession strategy is essential to the future of any business. One of the keys to a succession strategy is determining whom your successor will be early enough to familiarize them with the finer points of the business. A well-thought-out succession strategy also includes: A thorough job description of each position • A management/organizational plan • A plan to provide enough cash to meet the demands of • estate taxes A list of potential successors, taking each candidate’s • background into consideration A mechanism to ensure extensive on-the-job training for • the successor A succession strategy may also include a buy-sell agreement for the successor to purchase an owner’s share of stocks. A disability buyout or life insurance policy can provide the cash necessary for such a purchase. Consult with your insurance, legal and tax professionals. With proper planning, your objectives for business succession and secur- ing your family’s future can be met. Jack E. Rahmey, Rahmey Financial Group 56 COMMUNITY MAGAZINE