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As concerns about subprime mortgages plague the nation's leaders and lenders, America's homeowners are confused and worried about their own mortgages, according to a poll commissioned by Bankrate.com.
In the survey of 1,004 adults conducted by GfK Roper Public Affairs & Media, homeowners with mortgages were asked what type of mortgage they had. A stunning 34% of the homeowners had no idea.
| What type of mortgage do you have? | |
|---|---|
Fixed rate | 57% |
Adjustable rate | 6% |
Interest only | 3% |
Don't know | 34% |
"That's a symptom of the complexity of the mortgage market today," says Ken Wade, the chief executive officer of NeighborWorks America, a nonprofit that provides financing and training to neighborhood-based housing organizations.
A generation ago, mortgages were made primarily through banks. Today there are many more types of organizations making mortgage loans, some of which are less regulated than banks. Adding to the confusion is the variety of loans now available to borrowers. "There is a proliferation of new products that come on line just about every week, and I think it creates confusion among consumers," says Wade.
More from MSN Money and Bankrate.com
Younger borrowers, and those with less experience as investors, can find the array of loan choices particularly confusing. Anthony LaGiglia, the managing director of J.J. Burns & Co., a financial advisory firm in Melville, N.Y., says such borrowers have fewer benchmarks against which they can judge loan products. "They don't know what the market can be paying them in interest, and they don't know how much they should be paying on loans, either. That's a situation ripe for abuse by unscrupulous mortgage people."
What will you do with your ARM?
About 57% of homeowners with mortgages said they had fixed-rate mortgages; 9% knew they had some variety of an adjustable-rate mortgage, or ARM. Homeowners in the poll who knew they had an ARM were asked what they planned to do when the interest rate adjusts; 34% said they didn't know what they'd do."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, 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% said they worry either regularly or sometimes about how they will afford their payments. About 70% said they rarely or never have such worries.| What do you plan to do when your ARM readjusts? | Do you worry about making next year's home payments? | ||
|---|---|---|---|
Refinance to a fixed rate | 36% | Never | 53% |
Don't plan to have loan when it readjusts | 24% | Rarely | 17% |
Move | 4% | Regularly | 15% |
Get another ARM | 2% | Sometimes | 13% |
Don't know | 34% | Don't know | 2% |
Worry is directly tied to low earnings, according to the poll results. More than 40% of those earning less than $20,000 per year said they worry regularly about making payments, and nearly 26% 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, LaGiglia says. 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," LaGiglia says. On Long Island, N.Y., where LaGiglia lives, insurance costs have gone up and property taxes have soared, thanks to rising home values.
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