Money Management

Are higher mortgage rates forcing you to put off homeownership? Read on to see how you’re not alone. 

Buying a home is a challenge these days because housing inventory is very low on a national level and property values are still elevated. But for some buyers, today’s mortgage rates may be spelling the difference between being able to make an offer on a home and having to wait.

A good 35% of Americans say that rising mortgage rates have priced them out of the real estate market, according to a recent Quicken survey. But if you feel that way, you should know that waiting for mortgage rates to come down may not be your best bet.

Today’s mortgage rates could be here to stay for a while

A big reason why today’s mortgage rates seem so outrageous is that in mid-2020, rates plunged to record lows, and they stayed low through the end of 2021. It wasn’t until a few months into 2022 that rates started to climb at a rapid clip, pushing more buyers out of the market.

Meanwhile, mortgage rates have been stuck in the 6% range since the start of 2023. And at this point, buyers might need to come to terms with the fact these rates could be the norm for quite some time.

In fact, historically speaking, today’s mortgage rates aren’t so bad. There was a period back in the mid-1990s when signing a mortgage meant locking in an interest rate in the 9% range. And even in the early 2000s, it was common to sign a mortgage in the 6% range.

The reason today’s borrowing rates for mortgages seem so high is that buyers aren’t used to them. But if you’re looking to buy a home, you may need to get on board with them to bring that dream to life. Otherwise, you might get stuck in a holding pattern as a renter.

Now to be clear, there’s absolutely nothing wrong with renting a home on a long-term basis rather than buying one. For some people, not owning a home means having more predictable housing costs and not having to spend the time on maintenance and repairs. But if homeownership is a goal of yours, you might have to convince yourself that today’s mortgage rates are acceptable enough to move forward.

Refinancing is also an option

Mortgage rates may not shift too drastically in the near term from where they are today. But if you can afford to buy a home at today’s borrowing rates, remember that it’s always possible to refinance a mortgage down the line.

Rates may not drop enough for refinancing to make sense for a good number of years. But if you can afford the mortgage payments you start out with, you can simply keep making them until an opportunity arises to lower them.

If you’re looking to buy a home, it’s natural to want as low a mortgage rate on your loan as possible. But you may have to accept the fact that rates aren’t going to fall below 6% for quite some time and make your peace with that.

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Love Costco? Read on to see why you may want to avoid one specific bakery product it sells. 

Whether you use them for your own breakfast, school lunches, or dinner on the go, bagels are a great base for cream cheese, butter, and sandwich meats alike. And if you prefer to not rack up a giant credit card tab in the course of buying fresh bagels, then you may want to get your bagels from Costco.

Costco prides itself on its fresh bakery items that it makes available at low prices. In the New York metro area, a 12-pack of Kirkland Signature Plain Bagels costs $9.35 for same-day delivery. Now, it’s worth noting that same-day delivery items are commonly marked up, so the cost of these bagels in a Costco store is apt to be lower. Plus, your local Costco might have them for a lower price if you live in a less expensive part of the country.

But if you’re going to buy Costco bagels, you may want to proceed with caution. That’s because Costco customers recently began to raise some quality issues with this particular item.

Nobody wants moldy bagels

Freshly baked goods are apt to have a more limited shelf life than those that are packaged and mass produced. Products that fall into the latter category are commonly loaded with preservatives and other ingredients that are designed to help them last.

Costco’s bagels are made fresh, and they’re also not necessarily made to last for a week or longer. But some Costco customers are reporting that they’re only getting a few days out of their bagels before mold starts to appear.

In fact, a Reddit thread recently featured a Costco customer who was unhappy that their bagels molded just a few days after bringing them home, despite storing them in a plastic bag. Other Costco members chimed in to say that their bagels, too, got moldy after a day or two.

Some Costco members were quick to respond that the early presence of mold could be considered a good thing, since it means those bagels are really fresh and free of preservatives. But still, nobody wants to spend money on a larger quantity of bagels only to have to throw half of them away.

Should you buy your bagels at Costco?

Fresh bagels can be much tastier than packaged or frozen ones. But if you buy a bulk pack at Costco and end up tossing half of it out due to mold, then you’re not saving money — you’re wasting money. So if you only eat, say, one fresh bagel every two days or so, you may be better off heading to your local bagel store and buying one on the spot when the mood strikes you.

In fact, this rule should really apply to any freshly made item you purchase at Costco. Buying prepared food in bulk makes financial sense when you’ll get to use all of it. If that’s not the case, then you’re generally better off skipping the Costco purchase in question.

Meanwhile, if you really love your Costco bagels, you can always consider freezing some if you can’t consume your haul within a couple of days. That way, you’ll have extra bagels on hand in a pinch, and you won’t end up throwing your money away.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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It’s not a good idea to raid your long-term savings ahead of retirement. Read on to see why. 

We’re grappling with tricky economic times these days. Inflation is still surging, recession fears are looming, and many people are worried about their jobs ending up on the chopping block. Throw in the fact that a lot of people already have debt and raided their savings accounts, and it’s not surprising to learn that 53% of Americans say their personal financial situation has deteriorated, according to a recent Quicken survey.

That same survey, however, also reveals that 16% of people are dipping into their 401(k) plans due to their financial challenges. And that’s a problem on multiple fronts.

The issue with raiding a 401(k)

The problem with tapping a 401(k) plan is twofold. First, if you’re not yet 59 1/2 years old, taking a 401(k) plan withdrawal means facing a 10% penalty on the sum you remove. Incidentally, the same rules apply for IRAs.

So, let’s say you take $5,000 out of your 401(k) plan to deal with bills your regular paycheck can’t cover. In doing so, you’re looking at losing $500 to a penalty off the bat.

Plus, if you have your money in a traditional 401(k) plan, not a Roth, your withdrawal will also be subject to taxes. Now to be fair, the same would hold true for a 401(k) withdrawal taken during retirement. But all told, there are some immediate costs you might incur if you take money out of your 401(k) plan.

Another issue with raiding your 401(k)? The more money you remove now, ahead of retirement, the less money you’ll have during retirement, when you’re apt to need cash reserves to cover your living costs.

Also remember that 401(k) plans get invested. So let’s say your 401(k) only generates an average yearly 6% return. That’s actually a fairly conservative return, because the stock market’s average over the past 50 years, as measured by the S&P 500 index, is 10% before inflation. If you take a $5,000 withdrawal now at, say, age 40, but you’re not retiring for another 25 years, that withdrawal will actually end up costing you about $21,500 when you factor in lost gains.

A better way to access money

If you’re thinking of taking a withdrawal from your 401(k) plan to cope with higher expenses or to address another need, you may be in a pretty desperate spot. But before you raid your 401(k), think about the other options that may be available to you.

If your credit is in good shape (meaning, you have a score in the 700s or higher), you might qualify for a decent interest rate on a personal loan, which could be a relatively affordable way to borrow. Granted, borrowing rates are up right now. So even with good credit, you may be looking at a higher interest rate on a personal loan than usual. But it’s an option worth considering so you can leave your 401(k) plan alone.

Similarly, if you own a home you have equity in, borrowing against it may be doable. Your choices there include a home equity loan and home equity line of credit, or HELOC.

All told, it pays to explore different options before removing a chunk of money from your 401(k) plan. Avoiding that route could mean steering clear of costly penalties and giving your money the opportunity to keep growing the way you want it to.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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