Financial Literacy 2007 - Mortgages
A small cartoon woman with a large measuring tape measuring a yellow percent sign with a red background
Mortgage ignorance rampant

What will you do with your ARM?

A total of 57 percent of homeowners with mortgages said they have fixed-rate mortgages, 9 percent have some variety of an adjustable-rate mortgage. Homeowners in the poll who knew they had an adjustable-rate mortgage (ARM) were asked what they planned to do when the interest rate adjusts, 34 percent said they didn't know what they'd do.
What do you plan to do when your ARM loan readjusts?

Source: 2007

"I wish I could say that surprises me," says Kim McGrigg, a spokeswoman for Money Management International, a nonprofit national group that counsels consumers about homeownership and credit. "But, unfortunately, with the increase in demand for counseling that we've seen, that fact doesn't surprise me as much as it would have just a few years ago."

Taxes and insurance push up payments

A significant number of homeowners are worried about how they're going to afford their mortgage, property taxes and homeowners insurance next year. Nationally, 28 percent said they worry either regularly or sometimes about how they will afford their payments. Nearly 70 percent said they rarely or never have such worries.
How often do you worry about whether or not you'll be able to afford your home payments next year?

Source: 2007

Worry is directly tied to low earnings, according to the poll results. More than 40 percent of those earning less than $20,000 per year said they worry regularly about making payments, and nearly 26 percent of those earning between $20,000 and $29,900 per year said they worry sometimes.

Interest rates aren't the only source of that worry, says LaGiglia. Rising property taxes and homeowners insurance rates, especially in coastal areas, add to the monthly-payment burden.

"I can't tell you how many clients I have in Florida whose homeowners insurance costs have doubled or tripled. It's not just their interest payment," he says. On Long Island, N.Y., where LaGiglia lives, insurance costs have gone up and property taxes have soared, thanks to rising home values.   

Who worries least about making their housing payments?

It's not necessarily the richest households. The most sanguine were those earning between $40,000 and $49,900 per year. Nearly 70 percent say they never worry about payments, a rate even higher than the top earners. Just under 60 percent of those earning more than $75,000 per year say they are free from worry about making housing payments.

"The more risky types of loans that have become popular in recent years made it easy for people to buy houses, but difficult to keep them," says McGrigg.

There's no question that consumers need more education about mortgages, says Wade. More homeowners should take advantage of home-buyer counseling or, at a minimum, by doing their own significant research on the Internet. "They should do this before they even talk to a Realtor," says Wade. "Once they're in the process, there are a lot of pressures on them to hurry up and get the deal done."


You can get a referral to a local counseling organization through the U.S. Department of Housing and Urban Development.

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