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ERIC Number: EJ1162061
Record Type: Journal
Publication Date: 2017
Pages: 13
Abstractor: As Provided
ISSN: ISSN-1052-3073
Financial Literacy and the Use of Interest-Only Mortgages
Seay, Martin C.; Preece, Gloria L.; Le, Vincent C.
Journal of Financial Counseling and Planning, v28 n2 p168-180 2017
This study explored the relationship between financial literacy and the use of interest-only mortgages using data from the 2009 National Financial Capability Study (NFCS). A series of analyses were conducted to investigate characteristics associated with the use of an interest-only mortgage as a primary mortgage, as compared to fixed-rate mortgage and adjustable-rate mortgage (ARM) options. Consistent results indicate the individuals who incorrectly answered questions related to compound interest, mortgages, and diversification were more likely to be using an interest-only mortgage. Respondents with higher reported math skills were less likely to use an interest-only mortgage, whereas individuals with higher levels of financial confidence were more likely to be using one. These results reinforce concerns about a household's ability to understand and evaluate complex mortgage products.
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Publication Type: Journal Articles; Reports - Research
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A
Grant or Contract Numbers: N/A