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Do borrowers know their mortgage terms?

  • Bucks, Brian
  • Pence, Karen
Registered author(s):

    We assess whether borrowers know their mortgage terms by comparing the distributions of these variables in the household-reported Survey of Consumer Finances (SCF) to the distributions in lender-reported data. We also examine the characteristics of SCF respondents who report not knowing these contract terms. Although most borrowers seem to know basic mortgage terms, borrowers with adjustable-rate mortgages appear likely to underestimate or to not know how much their interest rates could change. Borrowers who could experience large payment changes if interest rates rose are more likely to report not knowing these contract terms. Difficulties with gathering and processing information appear to be a factor in borrowers' lack of knowledge.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0094-1190(08)00066-1
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    Article provided by Elsevier in its journal Journal of Urban Economics.

    Volume (Year): 64 (2008)
    Issue (Month): 2 (September)
    Pages: 218-233

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    Handle: RePEc:eee:juecon:v:64:y:2008:i:2:p:218-233
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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