Poll reveals lack of mortgage knowledge
Mar 30, 2007
Author: Family Realty LLC

As we talked about last week, the nation’s sub-prime lenders have been struggling recently with growing default rates. Bankrate.com recently conducted a poll to look into the consumer side of the borrowing to attempt to identify some of the causes of the high default rates. What they discovered is that many borrowers simply did not understand their mortgage position.
The survey of just over 1000 adults asked homeowners what type of mortgage they had and a stunning 34 percent had no idea.
In the past, mortgages were made primarily through your local bank. But in the past few decades, numerous types of mortgage outlets have become available. Additionally, we have many more options and types of mortgages for the homebuyer. These options may have led to a less informed buyer and increased abuse by unscrupulous mortgage brokers.
Those surveyed with Adjustable Rate Mortgages (ARM) were asked what they would do when their rates increased and 34 percent said they did not know what they would do. Thirty six percent said they would refinance to a fixed rate before the next adjustment.
The poll revealed that 28 percent of homeowners worry about affording their payments and nearly 70 percent said they rarely or never worry. In those that do worry, there seems to be a connection to low wage earners. More than 40 percent of those earning less than ,000 per year said they worry regularly about making payments, and nearly 26 percent of those earning between ,000 and ,900 per year said they worry sometimes.
So which type of loan did those polls say is best? Twenty nine percent of renters said they would avoid interest-only mortgages and 20 percent said they would avoid adjustable rate loans. Surprisingly, 24 percent of renters surveyed stated they would avoid fixed-rate loans. The highest rate avoiding fixed-rates were those earning more than ,000 a year, at 42 percent.
Complexity and numerous choices are many times cited as the cause for consumer ignorance. However, it is the consumer that must take the initiative in seeking counsel and education before making one of the biggest financial deals of their life.