Bankruptcy & Foreclosures

Not to sound like a broken record on the subject matter, the Economic Stimulus Package is pretty big news to us Americans of late. While the House has already passed its version of the plan, the Senate will follow suit with their own package later this week. The final numbers aren’t in yet but it very well could be the largest federal payout in history.

Here’s the catch, the government wants you to spend your rebate. Putting the money back into the economy is the catalyst to increased demand, which of course means more jobs, which of course means economic growth. The onset of a recession has pushed the Fed into early action in the hopes of nipping the problem in the proverbial bud.

What’s interesting is that the last time we faced a similar threat (2001), the Bureau of Economic Research reports that some 2/3rds of the income tax rate rollback was back in economic circulation within 6 months (much of it spent on appliances and home electronics).

This time surveys show that Americans are taking a broader approach to their budgeting. As a result many individuals have expressed interest in using their additional rebate money for long-term investing.

It’s hard for me to even advise the practice of spending just to spend, but fears of the additional funds being put into long-term securities are manifesting as the package becomes closer to reality. Let’s be honest here, the adjustable rate mortgage industry is partially responsible for these recent economic turbulence in the first place. The government has been taking efforts to slash interest rates of late and it’s not a bad idea to use this opportunity to ditch the adjustable rate mortgage (ARM) for a fixed-rate loan.

If you are having a hard time parting with your rebate check, perhaps consider using it for the costs of refinancing. Don’t let these low rates of late persuade you into keeping the ARM; with each ARM converting to a fixed rate, the economy gets one step closer to correction. When your tax rebate helps get it there, it becomes twice the economic benefit in one fell swoop.