Do borrowers know their mortgage terms?

By Brian K. Bucks, Karen Pence. Social Science Research Network, 2008

151 citations recorded by the source corpus.

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 lenderreported 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.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/925f9ed4780f4217f02e1518fc50cccf177ab5b1

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Citations in the corpus

The Outlook for Financial Literacy (2011, background): “1 For instance, Bergstresser and Beshears (2009), Gerardi et al. (2010), and Bucks and Pence (2008) show that the least financially literate are also most likely to fail to understand mortgage terms, take out complex mortgages, and fall behind on their housing payments.”
Household over-indebtedness - Definition and measurement with Italian data (2013, unknown): “Bucks and Pence (2008) show that borrowers with adjustable-rate mortgages are likely to underestimate or not know how much their interest rates could change.”