Money Management

It could save you some money, but there are risks involved. 

Although home prices have been elevated for several years now, in 2020 and 2021, buyers were at least able to offset those soaring prices with affordable mortgage rates. In fact, if you had great credit back then, you could pretty easily lock in a 30-year fixed-rate mortgage at or around 3%.

But borrowing rates have skyrocketed over the past year. And now, the cost of signing for a mortgage is more than double what it was at the end of 2021.

Now there are certain steps you can take as a mortgage borrower to snag a lower interest rate on a home loan. Improving your credit score, for example, could make borrowing a bit less expensive for you. So could shopping around with different lenders rather than signing the first mortgage offer you receive.

But there may be another move you can make to score a lower mortgage rate. Often, signing an adjustable-rate mortgage, or ARM, will give you some savings.

But does an ARM make sense this year? While you might enjoy some savings on your mortgage rate initially, you could end up taking on a really big risk.

Why ARMs can be dangerous

You might snag a lower mortgage rate for a few years when signing an ARM than you would with a fixed-rate loan. But you’re not guaranteed that lower rate for the reminder of your loan term.

At some point, the interest rate on your mortgage could climb, making your loan payments far more expensive. With a fixed-rate mortgage, you don’t take that risk.

Now, a lot of people sign an ARM with the plan to refinance their mortgages once borrowing rates drop. But the reality is that we don’t know what the next bunch of years have in store for mortgage rates.

So, let’s say you sign a 5/1 ARM, which means the rate on your mortgage can adjust once a year after five years. It may be the case that mortgage rates are higher at that point than they are today. That means refinancing probably won’t be feasible or worthwhile, thereby leaving you stuck to bear the cost of a rising interest rate.

Of course, the opposite could happen — mortgage rates could drop, making it possible to refinance out of an ARM as or before your rate starts to climb. And also, the rate on your ARM isn’t guaranteed to climb. It could actually drop over time, making your mortgage payments less expensive on a monthly basis without you actually having to do anything.

But is that a risk you’re willing to take with what’s probably your largest monthly expense? If the idea of a higher mortgage payment over time scares you, then a fixed-rate loan may be the best way to go — even with borrowing rates being higher these days than they’ve been in a long time.

Don’t rush into an ARM

Signing an ARM might work out well for you. But before you make that call, consider the alternatives. You may end up swapping some near-term savings for higher costs down the line, when you’re not actually able to handle them.

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That’s a devastating statistic. 

At the start of the COVID-19 pandemic, evictions came to a halt as lawmakers instituted a ban on them to prevent a mass homelessness crisis. But those protections are long gone. And as a result, a growing number of renters have come face to face with eviction in recent weeks.

The Eviction Lab at Princeton University reports that there were nearly 9,400 evictions in the past week alone. And in New York City, where there’s a notably large concentration of renters, there have been over 186,000 eviction filings since March of 2020.

Of course, it’s easy to see why so many tenants are at risk of eviction. For one thing, rental prices have soared the last few years, putting many tenants in the position of having to spend an uncomfortably large percentage of their income on housing payments.

The tight real estate market has only helped drive rent prices upward. Elevated home prices and mortgage rates have pushed many would-be buyers out of the market, thereby increasing the demand for rentals.

Plus, living costs have been up as a whole due to inflation. So between that and higher rent prices, it’s easy to see why so many tenants have been falling behind.

Now, if you don’t pay your rent when you’re supposed to, your landlord does technically have the right to move forward with an eviction. And that could mean not only losing your home, but also sustaining credit score damage. But that doesn’t mean you can’t take these steps to protect yourself.

1. Know your rights

Your landlord can’t slap you with an eviction notice the minute you don’t pay your rent. Read up on tenant rights, and talk to a lawyer if you feel yours are being violated. Lawhelp.org could give you access to an attorney at little to no cost.

2. Talk to your landlord about a payment plan

Maybe money has gotten so tight that you can no longer afford your $1,200 monthly rent payment. If so, don’t just not pay. Instead, talk to your landlord. Loop them in and ask to negotiate a payment plan — perhaps one that has you paying $200 a week for the foreseeable future until your financial circumstances improve.

The eviction process is clearly tough on tenants. But it’s not a picnic for landlords, either, and it can be costly for them, too. Landlords will often agree to negotiate if it means collecting some money while avoiding the whole legal process.

3. Try bartering for reduced rent

Maybe your rent has become unaffordable and you don’t see yourself being able to pay in full for quite some time. In this case, once again, talking to your landlord could go a long way. You may be able to barter for certain services — for example, you perform light maintenance tasks in exchange for a rent reduction that allows you to keep up with your payments.

It’s truly terrible to see such a notable uptick in evictions. If you’re worried that you’re at risk of being kicked out of your home, don’t just resign yourself to that fate. Instead, read up on your rights and do your best to talk things through with your landlord. You never know when they might be sympathetic to your plight.

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Image source: Getty Images
What happenedAmazon announced its plans to close its charity donation program, AmazonSmile, by Feb. 20 to cut costs. Since 2013, the program has made it easy for customers to support charities they care about at no extra cost while shopping through the online retailer.Amazon noted in a news release that with over 1 million registered organizations, the brand’s impact was spread too thin. According to a recent CNBC article, “the average donation to charities was less than $230.”The company will continue to focus on other charitable efforts. Amazon said it would provide charities that were part of the AmazonSmile program with a one-time donation equivalent to three months of their 2022 program earnings.So whatAmazonSmile helped charitable organizations boost donations and encouraged shoppers to give back while shopping. The retailer donated a percentage of eligible Amazon purchases to registered organizations through the initiative. This solution made it easy for online shoppers to make a difference without reducing their checking account balances.With this news in mind, customers may seek other ways to support their favorite organizations. The retailer noted that once the program ends, charities can seek support from Amazon customers by creating wish lists, which customers can shop to donate goods.Now whatAmazon customers who relied on the AmazonSmile to support essential charities may be looking for other ways to help out. Here are four alternative ways to give back to charities:Buy items from an Amazon wish list: Customers can buy linked products through Amazon wish lists set up by charities.Make a direct donation: Another way to get involved is to donate directly to charities. Taxpayers who itemize their tax deductions may qualify for a tax deduction by donating to qualifying organizations, so don’t miss out on potential tax breaks.Donate goods: Many organizations benefit significantly from in-kind donations. Here are some examples: Animal shelters often request extra blankets, towels, and sheets. Charities that support foster youth collect suitcases and toiletries to ease the transition between homes. Some organizations collect and pick up used furniture to help people furnish their homes.Give the gift of time: Another idea is to donate your time to a local charity. Many organizations are understaffed and can use extra help to manage everyday affairs. If you want to make a difference, but your personal finance situation makes it difficult to make a monetary donation, this is another way to help.Just because the AmazonSmile program will soon be no more doesn’t mean that you can’t find small ways to make a big difference. Even if you’re on a limited budget and don’t have a lot of money or time to give, your efforts matter.Alert: highest cash back card we’ve seen now has 0% intro APR until 2024If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee. In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes. Read our free reviewWe’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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy. 

What happened

Amazon announced its plans to close its charity donation program, AmazonSmile, by Feb. 20 to cut costs. Since 2013, the program has made it easy for customers to support charities they care about at no extra cost while shopping through the online retailer.

Amazon noted in a news release that with over 1 million registered organizations, the brand’s impact was spread too thin. According to a recent CNBC article, “the average donation to charities was less than $230.”

The company will continue to focus on other charitable efforts. Amazon said it would provide charities that were part of the AmazonSmile program with a one-time donation equivalent to three months of their 2022 program earnings.

So what

AmazonSmile helped charitable organizations boost donations and encouraged shoppers to give back while shopping. The retailer donated a percentage of eligible Amazon purchases to registered organizations through the initiative. This solution made it easy for online shoppers to make a difference without reducing their checking account balances.

With this news in mind, customers may seek other ways to support their favorite organizations. The retailer noted that once the program ends, charities can seek support from Amazon customers by creating wish lists, which customers can shop to donate goods.

Now what

Amazon customers who relied on the AmazonSmile to support essential charities may be looking for other ways to help out. Here are four alternative ways to give back to charities:

Buy items from an Amazon wish list: Customers can buy linked products through Amazon wish lists set up by charities.Make a direct donation: Another way to get involved is to donate directly to charities. Taxpayers who itemize their tax deductions may qualify for a tax deduction by donating to qualifying organizations, so don’t miss out on potential tax breaks.Donate goods: Many organizations benefit significantly from in-kind donations. Here are some examples: Animal shelters often request extra blankets, towels, and sheets. Charities that support foster youth collect suitcases and toiletries to ease the transition between homes. Some organizations collect and pick up used furniture to help people furnish their homes.Give the gift of time: Another idea is to donate your time to a local charity. Many organizations are understaffed and can use extra help to manage everyday affairs. If you want to make a difference, but your personal finance situation makes it difficult to make a monetary donation, this is another way to help.

Just because the AmazonSmile program will soon be no more doesn’t mean that you can’t find small ways to make a big difference. Even if you’re on a limited budget and don’t have a lot of money or time to give, your efforts matter.

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In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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You might pay a lot, but things may go more smoothly than in previous years. 

When my husband and I bought our new construction home about 14 years ago, we were initially told that our expected move-in date would occur during the month of June. In reality, our build was delayed by almost six months, forcing us to bounce around in temporary housing and on other people’s couches until our new home was ready.

But a six-month delay isn’t so unusual in the world of new construction. In fact, it’s a minor delay compared to the holdups new construction buyers have faced in recent years.

Things may finally be improving in that regard, though. So if you’ve had new construction on your radar, 2023 may be a good year to go after it.

You might experience fewer delays

There’s a reason new home builds were extensively delayed from 2020 through 2022. In 2020, the COVID-19 pandemic hit, and a lot of construction projects had to be paused due to health and safety concerns.

In 2021, supply chain backlogs came to a head, and new construction projects were delayed by virtue of builders not being able to get the materials needed to complete their work. Those issues persisted in 2022, though to a lesser degree than in 2021.

But at this point, some supply chain issues have been resolved within the context of home building. This isn’t to say that buyers of new construction won’t experience holdups. You never know when a given tile, cabinet, or appliance might end up on backorder, thereby delaying your build by weeks or even months. And you never know when a builder might get delayed due to municipal hiccups, like having to wait for a permit to get issued.

But for the most part, builders aren’t grappling with the same supply chain issues they were over the past couple of years. So if you buy a new construction home in 2023, you may find that your build isn’t delayed to a ridiculously extreme degree.

Is a new construction home right for you?

There are definite benefits to buying new construction. For one thing, you may get the option to customize certain features of your home (for example, pick your own countertops and flooring), and once you move in, you’ll be guaranteed a home in top condition. Plus, the new appliances your home is loaded with should come with warranties, which means you may not have to worry about extensive — and expensive — home repairs for a good number of years.

On the other hand, the cost of new construction can be much higher than the cost of a home that was previously lived in. And given that mortgage rates are so high these days, affordability issues could be a problem.

You’ll need to crunch your numbers carefully to make sure you can swing the mortgage payments a newly built home will leave you with. But if you do decide to move forward with new construction, you may find that you’re not subject to such disruptive delays as supply chains finally catch up to demand.

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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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