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

Which of these loans is better?

The poll, conducted mid-March, surveyed renters and homeowners and found that adjustable-rate mortgages have a poor reputation among homeowners who have them, and renters who might one day use them. 

Nationwide, 36 percent of homeowners who now have an ARM said they planned to refinance to a fixed-rate loan when their ARM changes. Only 2 percent planned to refinance into another ARM.

They were sour on different varieties of ARMs, as well. Nationally, 29 percent of renters said they would avoid interest-only mortgages, and that figure shot up to nearly 40 percent among those living in the Northeast.

Nationally, 20 percent of renters said they would specifically avoid "option ARMs," which allow a homeowner the option of sending in a minimum payment that is not high enough to cover the full amount owed that month.

Though a majority (57 percent) of homeowners who have a mortgage say theirs is a fixed-rate loan, nearly a quarter (24 percent) of renters said they would avoid taking out a fixed-rate loan. The share of renters shunning fixed-rates was highest among those earning more than $75,000 per year, at 42 percent.

What's holding buyers back?

Most renters are not staying out of the housing market for fear that prices will go down; instead 40 percent said the main obstacle holding them back from a purchase was that they didn't have enough money to afford a home, according to our poll. The share of renters citing that they didn't have enough money was even higher among renters living in the Northeast and West, where prices are highest. Nearly half of those in the Northeast and West (49 percent and 48 percent, respectively) cited lack of funds as the top obstacle.
What, if anything, is holding you back from buying a home today?

Source: 2007

Credit concerns were the second most-frequently cited obstacle keeping renters from a home purchase. Nationwide, just under 12 percent said their credit standing was not yet high enough to buy a home, but that share reached nearly 21 percent among renters living in the South.

Nationwide, less than 2 percent of renters surveyed said fear of falling prices was causing them to hold back. And that share was still under 3 percent in the high-priced Northeast and West. Another 9 percent of respondents said they simply don't want to buy a home. Nationwide, nearly 13 percent reported that they intend to buy a home soon.

This national random-digit-dialed phone study of 1,004 adults 18 or older was conducted for Bankrate by GfK Roper Public Affairs & Media. The surveys were conducted from March 17 through March 18, 2007. The sample was weighted by demographic factors including age, gender, race, education and census region to ensure reliable and accurate representation of adults in U.S. households. Results based on the entire sample of 1,004 adults are projectable to the entire adult population in the United States, with a sampling error of plus or minus 3 percentage points.

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