On Tuesday, President Joe Biden posted a link to the page on the Internal Revenue Service website that lists all cars that, at least in theory, are eligible. 

Thanks to the Inflation Reduction Act, folks who purchase electric vehicles can receive a federal tax credit of up to $7,500 per vehicle, allowing millions of consumers to ditch the pump and easily switch to an EV, he celebrated.

Suffice to say this is a slight exaggeration.

First off, simply picking from the various vehicle models listed wont doits a bit more complicated than that.

Each nameplate cannot exceed a certain price threshold depending on whether they are classified either as a passenger car or a light-duty vehicle, such as more expensive SUVs and pickup trucks. 

Thats why only Teslas entry version Model 3 with a single motor is eligible for the credit. Its $46,990 price tag comes in below the applicable manufacturers suggested retail price (MSRP) limit of $55,000 listed on the IRS page.

The Cadillac Lyriq is also listed by the IRS, but since it starts at $62,990, only a hefty price cut by General Motors will mean it qualifies.  

So its important to always cross-reference the car with the current MSRP found on a carmakers website.

There are a few more peculiarities of which potential buyers should be aware.

The administration first needed to determine what can be considered an electric vehicle.

For instance, a fuel cell car like the Toyota Mirai that starts at $49,500 doesnt use a battery, and yet it is electric, making it a potential contender. Too bad its manufactured outside the North American continent then, putting it out of the running. 

For those vehicles that run on high-voltage traction batteries, by comparison, the bar for what can be deemed electric in the eyes of the IRS was set absurdly low by the government.

That is no coincidence since it allows for the much-maligned plug-in hybrid electric vehicles (PHEV), which rarely offer a useable electric range, to clear the hurdle.

For that reason, Audis $57,400 turbocharged Q5 Quattro SUV with permanent all-wheel drive imported from the carmakers plant in Mexico can count on the support of U.S. taxpayers despite its microscopic range of just 23 miles on one charge.

The same goes for the Jeep Grand Cherokee 4xe SUV that costs $60,360 and manages 25 miles before having to fire up the internal combustion engine. 

All a PHEV needs to prove is that its battery has a capacity of at least 7-kilowatt hours. To put this into perspective, most battery electric vehicles (BEVs) come with a minimum 50 kWh battery pack and some like the BMW iX or Mercedes EQS are even twice that size.

This elicits understandable criticism as its entirely possible (though inadvisable given fuel prices) that they can be driven without ever charging the battery at all. 

Is a crossover a car or an SUV?

The final peculiarity is the issue of what precisely constitutes a light vehicle and here is where Tesla is at a material disadvantage.

Elon Musks hugely popular Model Y does notat least presentlyqualify since the crossover is considered by the IRS under longstanding rules to be a car under its sheet metal and not an SUV.  

Aspects like its approach angle doesnt allow it to scale rocky terrain, nor is its ground clearance sufficient to allow for off-road driving. 

Without it, it is subject to the $55,000 manufacturers suggested retail price (MSRP) cap for passenger cars rather than the more generous $80,000 threshold for light vehicles.

Currently, the most affordable Model Y starts at $65,990 so Tesla would have to knock off nearly a fifth of the priceit would be cheaper just to offer the $7,500 as a rebate off the hood than attempt to qualify. 

That is unless the Y is purchased in its optional seven-seat configuration for an extra $3,000, which the IRS then classifies as a light-duty vehicle.

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With home ownership being such a pricey proposition, more than a few buyers may need to find alternative ways to get into a property. In this environment, adjustable rate mortgages (ARMs), which offer a lower introductory interest rate than traditional fixed-rate mortgages, may be an appealing option.

But there are pros and cons to keep in mind when considering ARMs, including the fact that the interest rate doesnt remain low forever, and when it finally adjusts, your monthly payments may increase and even become prohibitively expensive.  

What is an adjustable-rate mortgage, and how does it work? 

An adjustable-rate mortgage begins with an initial introductory interest rate and after the promotional period ends, the rate adjusts either on a monthly or yearly basis in tandem with market fluctuations. The introductory rate may last for as little as six months or as long as 10 years, and it is often far lower than rates available on 30-year fixed-rate mortgage loans.

An adjustable-rate mortgage is a mortgage product based on a 30-year repayment schedule, but the interest rate is not permanently fixed for the entire 30 years, says Brian McCauley, a mortgage officer with The McCauley Team, a Texas-based lending team. The most common ARM options are a five-, seven-, and 10-year ARMThe shorter the time frame you choose, the lower and more competitive the interest rate, so you want to choose wisely to maximize as much savings as you can without putting yourself at high risk.

There are also various caps in place regarding how much ARM interest rates and the resulting monthly mortgage payments can increase, according to the Consumer Financial Protection Bureau (CFPB). The caps cover the initial rate hike once the introductory period ends, as well as subsequent rate adjustments, and adjustments over the lifetime of the loan.

The initial rate increase after the intro period ends is typically between 2% to 5%, according to the CFPB. Subsequent rate adjustments, meanwhile, are often around 2%. And over the life of the loan, the rate generally shouldnt increase more than 5% higher than your initial rate.

Pros of adjustable rates 

While there are some risks involved, there are also many benefits when using ARMs, particularly for short-term home buyers who may move before the interest rate resets, those planning to refinance their mortgage down the road, and for buyers with a strong and consistently reliable cash flow. 

Low initial interest rates

For first-time home buyers who are finding fixed-interest rate mortgages prohibitive amid the current environment, ARMs offer a valuable way to make home ownership more affordable.  As of January, ARM rates are between 5.5% and 6.16%, according to Bankrate, while the rates on 30-year fixed mortgages start around 6.6%.

In this high-interest rate environment, ARMs can be a way to start homeownership at a lower interest rate with the hope of refinancing if interest rates come down prior to when the five-, seven- or 10-year initial fixed-period ends, says Jack Kammer, vice president of mortgage lending for the national mortgage originator, OriginPoint.

You can put more toward principal

Because the monthly mortgage payment starts out so much lower with an ARM, home buyers may have the opportunity to direct some of that saved money toward paying down the loan principal more aggressively.

If youve decided on a specific monthly house payment budget, an ARM could allow you to apply the difference between the mortgage payment and the higher budgeted payment, Kammer adds. 

In addition to using that saved money to diminish principal, you can also use the free cash toward other worthwhile investments and even paying down debt.

Payments decrease when interest rates fall

Though interest rates have been trending upward for a year now, when rates decrease, so too does the interest on your ARM. And as a result, your monthly mortgage payment as well. In other words, the adjustable element of an ARM doesnt mean the rate always goes up, though ARMs have earned a reputation for primarily doing just that. 

The starting rates can go down with the market as well once that temporary period expires.  Ive seen clients benefit from this many times, says McCauley. There are substantial savings for the clientcheaper payments, more affordability, and more money in their pocket to save, invest, or even use to pay off other debt. It creates more cash flow and accelerates a clients wealth accumulation.

Cons of adjustable rates 

Despite the many benefits already identified by experts, ARMs may not be the right choice for all homebuyers. The unpredictability of regularly adjusting payments and slightly complex rules associated with these mortgages may be off-putting for some buyers. This type of mortgage may also be a bad choice for those who are unsure how long they may remain in a home.

Higher payments when interest rates increase

Though this point has already been emphasized by experts, its an important one to understand: Payments on an ARM can trend upward enough that it may make the expense untenable for some peoples budgets, particularly if their income has been impacted in any way at the same time.

If you dont do anything with the ARM once the initial short-term fixed rate expires and the market is up at that time, your adjustable rate will continue to increase with the market over time, says McCauley. There are rules around these adjustmentsso it wont go from 3% to 7% overnight, but it can steadily rise each year, so this can get costly in the monthly payments if you dont take action quickly.

Once the introductory period ends, you need to be financially ready to refinance, move, or have the means to cover the new, higher mortgage payment. If you opt for refinancing, its important to remember that doing so in a high-rate environment may not be ideal either.

Refinances arent necessarily bad as long as there is a strong net tangible benefit to the borrower, explains McCauley. Refinances also have closing fees, and they are fully qualifying home loans which means you have to do an all-new credit report, updated financials, and  new appraisal. So, you need to ensure you qualify and are prepared for this refinance if this ends up being the route you choose.

Complicated rules and fees

By their very fluctuating nature, ARMs are more complicated than a simple fixed-rate mortgage. Youll need to stay abreast of when the introductory rate ends, as well as other rules and fees associated with an ARM. This can be more challenging for new home buyers or those who dont take the time to fully review the nuances of how an ARM works.

The disclosure process also has one extra disclosure with the purpose of fully explaining and educating the borrower about an ARM, says Kammer. This is called the Consumer Handbook on Adjustable-Rate Mortgages.

You may struggle to make payments when intro period ends

As the past few years have made abundantly clear, its hard to predict the future, and your financial situation could be vastly different when the introductory period for your ARM ends. For this reason, ARMs should be considered carefully.

The danger of an ARM is the delayed risk thats not apparent during the introduction period, says Mike Hardy, managing partner for national lender Churchill Mortgage. As weve seen firsthand recently, markets can behave irrationally when we least expect it. If an ARM reset takes place during an unfavorable economic cycle, that can potentially lead to a higher-than-affordable payment after an ARM reset.

The Great Recession of 2007 and 2008 offers a vivid example of this potential scenario and downfall. Many of the attractive ARM loan programs from 2004 through 2006 were designed to reset after two or three years. As inflation set in a few years later and the Federal Reserve tightened the Federal Funds rate in response, many ARM products reset and caught scores of homeowners by surprise, which ultimately caused a great deal of financial challenges and hardship.

Id only recommend ARMs for more sophisticated investors or highly disciplined individuals that have not only a short-term need in housing but also the financial wherewithal to weather economic surprises and swings in the market, says Hardy.

When is an adjustable rate mortgage right for you? 

So how to decide when an ARM is right for you? Theres a variety of considerations to sort through as you figure out whats best for you and your financial needs. Perhaps the first and most important question to ask is how long do you plan to be in the home.

While a risky bet for those with a long-term outlook, an ARM can make sense during shorter-term housing needs, says Hardy. In some cases, an individual or family will have a five-year window and know this upfront. In this scenario, a five- or seven-year year ARM makes sense, as the higher the level of certainty in a timeline, the better for planning to go in this direction.

Using an ARM may also make sense if youre looking for a starter home and may not be able to afford a fixed-rate mortgage. Historically, says McCauley, most first- and second-time home buyers only stay in a home an average of five years, so ARMs are often a safe bet.

When should you avoid an adjustable-rate mortgage?

For some home buyers, an ARM will simply not be a sound financial choice. This is particularly true for those who are already having challenges obtaining a mortgage of any kind or are stretching their finances to make mortgage payments work within their operating budget.

An ARM should be avoided if you are right on the edge of qualifying, as I lean toward the elimination of as much risk as possible, says Hardy. A fixed-rate mortgage, however, is similar to buying insurance against a worst-case scenarionot all that unlike health or car insurance.

ARMs are also not the best choice for those who prefer the certainty of a reliable payment or for buyers whose finances fluctuate and therefore need long-term predictability in their monthly mortgage. 

The takeaway 

Amid the current high-interest rate environment, an ARM can offer a more affordable mortgage payment. But the introductory interest rate that makes your monthly payments cheaper wont last forever. Be sure to consider your financial picture over both the short-term and long-term and ensure that you can comfortably afford a mortgage payment once the rate begins fluctuating. 

ARMs are really good products that help people get a lower rate, save more money, and feel better about affordability, says McCauley. The home buyer just needs to fully understand all of their options, get with an experienced mortgage advisor, set up an entire mortgage planning session, and go through every loan and financial option available for them. Becoming a homeowner is one thing. Becoming a smart homeowner is another and thats the ultimate goal.

But after a year of searching, the state has approved just 51 people for payments out of 310 applications. Theres one year left to look before the $4.5 million program shuts down and the challenges remain steep. State officials have denied 103 people, closed three incomplete applications and are processing 153 others but they say its difficult to verify the applications as many records have been lost or destroyed.

Two groups of people are eligible for the money: Those sterilized by the government during the so-called eugenics movement that peaked during the 1930s and a smaller group who were victimized while in state prisons about a decade ago.

We try to find all the information we can and sometimes we just have to hope that somebody maybe can find more detailed information on their own, said Lynda Gledhill, executive officer of the California Victims Compensation Board that oversees the program. Were just sometimes not able to verify what happened.

California in 2021 was the third state to approve a reparations program for forced sterilizations, joining North Carolina and Virginia. But California was the first state to also include more recent victims from its state prison system.

The eugenics movement sought to prevent some people with mental illness or physical disabilities from being able to have children. California had the nations largest forced sterilization program, sterilizing about 20,000 people beginning in 1909. It was so well known that it later inspired practices in Nazi Germany. The state did not repeal its eugenics law until 1979.

Of the 45 people approved for reparations so far, just three were sterilized during the eugenics era. With surviving victims from that time in their 80s, 90s and beyond, state officials have sent posters and fact sheets to 1,000 skilled nursing homes and 500 libraries across the state in hopes of reaching more of them.

The state also signed a $280,000 contract in October with JP Marketing, based in Fresno, to launch a social media campaign that will run through the end of 2023. The biggest push will begin this month, when the state will pay for TV and radio ads in Los Angeles, San Francisco and Sacramento that will run through next October.

The hope is that victims friends or relatives will see the ads and help their loved one apply for the program. Only victims are eligible for payments. But if a victim dies after being approved but before receiving the total payment, they can designate a beneficiary such as a family member to receive the money.

We take that mission very seriously to find these folks, Gledhill said. Nothing we can do can make up for what happened to them.

The second group of people eligible for reparations were sterilized in California prisons. A state audit found 144 women were sterilized between 2005 and 2013 with little or no evidence they were counseled or offered alternative treatments. State lawmakers responded by passing a law in 2014 to ban sterilizations in prison for birth control purposes while still allowing for other medically necessary procedures.

Its been much easier to find records verifying those victims, as their procedures happened recently. State officials have sent letters to inmates believed to have been sterilized and urged them to apply while also putting up fliers in state prisons advertising the program.

Wendy Carrillo, a Democratic member of the California Assembly who pushed to get the program approved, said she will ask lawmakers to extend the application deadline beyond 2023. She wants to give victims more time to apply, and she wants to expand the program to include victims who were sterilized at county-funded hospitals. The Los Angeles County Board of Supervisors apologized in 2018 after more than 200 women were sterilized at the Los Angeles-USC Medical Center between 1968 and 1974.

Im not thrilled with the numbers that we are seeing so far, but I believe that as we exit out of COVID and we begin to fully work at our full capacity meaning that we are able to do community meetings and in-person meetings and more direct outreach other than behind a computer and through Zoom things will change, she said.

Finding inmates who were sterilized is still a challenge, Gledhill said. Its a population that may not be very trusting of government, given what happened to them.

One of those people is Moonlight Pulido, who was serving a life sentence for premediated attempted murder. While in prison in 2005, Pulido said a doctor told her he needed to remove two growths that could be cancer. She signed a form and had surgery. Later, something didnt feel right. She was constantly sweating and not feeling like herself. She asked a nurse, who told her she had had a full hysterectomy, a procedure that removes the uterus and the cervix, and sometimes other parts of the reproductive system.

Pulido was shocked. She was 41-years-old at the time, already had children and was serving a life sentence. But she said the doctor took her right to start another family something that deeply affected her.

Im Native American, and we as women, were grounded to Mother Earth. Were the only life-givers, were the only ones that can give life and he stole that blessing from me, she said. I felt like less than a woman.

Pulido was released on parole in January of 2022. Working with the advocacy group Coalition for Women Prisoners, she applied for reparations and was approved for a $15,000 payment.

I sat there and I looked at it and I cried. I cried because I have never had that much money ever in my life, she said.

Pulido could get more money. The state has $4.5 million for reparations and whatever is left over once the program ends will be divided up evenly among approved victims.

Pulido said she spent some of the money fixing up a car someone gave her when she got out of prison. Shes trying to save the rest. Known as DeAnna Henderson for most of her life, Pulido said she changed her name shortly before being released from prison taking inspiration from gazing at the moon outside the window of her cell.

DeAnna was a very hurt little girl that carried a lot of hurt baggage, and I got tired of carrying all that around, she said. Ive lived in the darkness for so long I want to be part of the light thats going to be part of my name.

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