Survey Finds Many 'Clueless'
A stunning 34% of homeowners polled by Bankrate.com said they don't know whether their loan is a fixed-rate or adjustable-rate product.
Intriguingly, of those who claimed they did know what kind of loan they had, 0% claimed to have option-ARM loans, despite the popularity of that potentially risky product in recent years. Only 6% of respondents said they had an adjustable-rate mortgage, and 3% said they had an interest-only product, suggesting that only about 9% of borrowers know they have an ARM product. Because the ARM origination share has been much higher than that, likely a good chunk of borrowers who claim not to know what kind of loan they have, in fact, have an ARM.
Among borrowers who did know that they had an adjustable-rate loan, many had no clear idea about what they would do when the loan payment adjusts upward. Among respondents, 36% said they plan to refinance into a fixed-rate loan. But 34% said they don't know what they'll do, while 24% of respondents said they don't plan to have the loan when it readjusts.
One thing many borrowers do know is that their payments are a stretch financially. Twenty-eight percent indicated they worry about how they will afford their mortgage payments, but 70% said they rarely or never have such worries. Those who did worry about their ability to make payments were, not surprisingly, predominantly low- and moderate-income borrowers. Over 40% of those making less than $20,000 annually worried about their payments, and 26% of people making between $20,000 and $30,000 said they worry about their payments.
Rising property taxes and insurance bills add to the worries about housing costs, according to Bankrate.com.
The survey also found that consumers, both current homeowners and renters, are skeptical about ARM loan products. Twenty percent of renters said they would avoid choosing an "option ARM" product and 36% of current homeowners with an ARM plan would refinance into a fixed-rate loan.
The study was conducted for Bankrate by GfK Roper Public Affairs & Media and just over 1,000 adults were contacted by phone.
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