AARP Consumer Home Equity/Home Improvement Lending Survey

Transcription

1 Research AARP Consumer Home Equity/Home Improvement Lending Survey Data Collected by International Communications Research (ICR) Report Prepared by Helen Brown November 2000 Copyright AARP, 2000 AARP 601 E Street NW Washington DC Reprinting with Permission

2 AARP is the nation s leading organization for people aged 50 and older. It serves their needs and interests through information and education, research, advocacy and community services which are provided by a network of local chapters and experienced volunteers throughout the country. The organization also offers members a wide range of special benefits and services, including Modern Maturity magazine and the monthly Bulletin. Acknowledgements This report was prepared in the AARP Membership Cluster for the Consumer Protection section in Life Resources by Strategic Issue Research in Knowledge Management. For more information, contact Helen Brown at

3 Table of Contents FINDINGS...1 Finances of Home Ownership...1 Experience with Home Equity Loans...2 Home Improvement Contractors...6 CONCLUSIONS...7 List of Figures Figure 1 Status of Home Ownership...1 Figure 2 Percent of Respondents Who Have Seen or Heard Home Equity Loans Advertisements...2 Figure 3 Percent Who Received Home Equity Loan Information...3 Figure 4 Most Frequent Ways Home Equity Loans Solicitations Received...3 Figure 5 Percent Who Have Taken Out a Home Equity Loan in the Last 10 Years...4 Figure 6 Where Respondents Got Their Home Equity Loan...4 Figure 7 How Respondents Selected Their Lender...5 Figure 8 Percent Who Would Turn to Source for Help with A Home Equity Loan Complaint...6 Figure 9 Where Respondents Would Go for Help to Resolve a Home Improvement Contract Complaint...7 APPENDIX AARP Consumer Home Equity/Improvement Lending Survey Annotated Questionnaire

4 AARP contracted with International Communications Research (ICR) of Media, PA to include questions on home equity and home improvement loans in their national omnibus telephone surveys. ICR called 2,114 individuals 50 years old and over between October 23 and 31, This research reports the findings from interviews with the 1,700 persons (85%) called who said they own their primary place of residence. Persons called who said they owned a manufactured house or mobile home were not interviewed (10%). The percentages reported are based on data weighted to represent the U.S. population 50 years of age or older. The margin of error is plus or minus 2.6. FINDINGS Finances of Home Ownership When the respondents were asked, Do you own your home outright or are you paying off a mortgage? most said that they owned their home outright (Figure 1). Figure 1 Status of Home Ownership Base: Respondents who own their own home (Unweighted n=1,546) Paying off mortgage 39% DK/Ref 2% Own home outright 59% Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November Among U.S. adults age 50 or older the likelihood of owning one s home outright is related to three demographic characteristics: ages 65 and older (78%) vs. ages 50 to 64 years (43%) annual income less than $30,000 (71%) vs. $30,000 or more (50%) (A large number of older homeowners who own their home outright are retired and therefore have lower incomes.) high school or less education (66%) vs. a college degree (54%) and some college (52%) AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 Page 1

5 A large majority (95%) of the homeowners have insurance on their home to protect against loss in case of fire or other disaster. However fewer (75%) think they have enough money set aside for major home repairs such as replacing a roof. The likelihood of having enough money for repairs is related to four demographic characteristics: male (82%) vs. female (70%) annual household income $30,000 or more (83%) vs. less than $30,000 (62%) college graduates (81%) vs. high school or less (71%) white (78%) vs. nonwhite (62%) Experience with Home Equity Loans In the last year, an overwhelming large majority of the respondents have seen or heard advertisements for borrowing money against their home (Figure 2). Figure 2 Percent of Respondents Who Have Seen or Heard Home Equity Loans Advertisements Base: Respondents who own their own home (Unweighted n=1546) No 13% DK/Ref 1% Yes 86% Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November In addition, nearly three quarters (73%) of the respondents say they have received information offering them the opportunity to borrow money against their homes (Figure 3). AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 Page 2

6 Figure 3 Percent Who Received Home Equity Loan Information Base: Respondents who own their own home (Unweighted n=1546) DK/Ref 3% No 24% Yes 73% Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November Those most likely to get this information are younger, more affluent and better educated persons: under age 65 (80%) vs. ages 65 and older (66%) income $30,000 and over (79%) vs. less than $30,000 (67%) college graduates (80%) and some college (78%) vs. high school or less (67%) Direct mail, telephone, and are the three most frequent ways respondents say that they are solicited to apply for a home equity loan. More than nine in ten respondents have been contacted through direct mail (Figure 4). Figure 4 Most Frequent Ways Home Equity Loans Solicitations Received Base: Respondents who own their own home and received information (Unweighted n=1147) 100% 92% 80% 60% 40% 20% 12% 38% 0% Phone Direct mail Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 Page 3

7 Nearly one in four (24%) respondents have taken out a home equity or home improvement loan within the last ten years (Figure 5). Figure 5 Percent Who Have Taken Out a Home Equity Loan in the Last 10 Years Base: Respondents who own their home (Unweighted n=1546) DK/Ref 1% Yes 24% No 75% Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 While most got their loans from either a bank, a mortgage broker, or a credit union, they were far more likely to say that they got their loan from a bank (69%) compared to the other lending sources (Figure 6). However, more than half (52%) of those who had taken out a loan did not talk with more than one lender to compare interests rates. Figure 6 Where Respondents Got Their Home Equity Loan Base: Respondents who have taken out a home equity loan in the last 10 years (Unweighted n=405) Bank 69% Mortgage broker 23% Credit unions 12% Other 3% 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 Page 4

8 Respondents who had taken out a home equity loan were asked how they selected the lender. The majority had applied to a personal bank or credit union (62%). However, more than a quarter said that they selected their lender based on a lender s solicitation, including an advertisement or a mail, phone, or door-to door solicitation. Fewer than one in six said that used any other way to select their lender (Figure 7). Figure 7 How Respondents Selected Their Lender Base: Respondents who have taken out a home equity loan (Unweighted n=405) Applying to a personal bank or credit union 62% Applying to a mortgage broker 16% An advertisement 15% Mail, phone, or door-to-door solicitation 13% 0% 10% 20% 30% 40% 50% 60% 70% Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November All of the respondents were asked if it is true or false that individuals bill-paying history on their credit record affects their ability to get a home loan. More than eight in ten (83%) said they believed this is true. In contrast, when asked if they believed bill-paying history on the credit record affects the interest rate a lender charges, only two thirds (65%) said this is true. Whether one believes credit report information affects the ability to get a loan and the lending rate is related to demographic characteristics. For example, persons most likely to say that the credit information affects whether one can get a loan are in the following groups: age 50 to 64 years (91%) vs. ages 65 or older (74%) annual household income $30,000 or more (91%) vs. less than $30,000 income (74%) college graduates (91%) vs. high school or less (79%) white (85%) vs. black (67%) AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 Page 5

9 Whether respondents believe that credit reports affect loan rates vary by gender and income groups. More males (72%) than females (59%) and persons with an annual household of $30,000 or more (73%) than less than $30,000 income (59%) say it is true that the credit rating affects the loan rate. When asked if they had a complaint about a home improvement or home equity loan, where they would turn for help in getting the complaint resolved, at least a third or more of the respondents said they would seek help from all seven sources about which they were asked (Figure 8). Sources most frequently mentioned were lawyers or other professional advisors (66%) and the Better Business Bureau (65%) Figure 8 Percent Who Would Turn to Source for Help with A Home Equity Loan Complaint Base: Total respondents who own their own home (Unweighted n=1546) Lawyer or other professional advisor Better Business Bureau 66% 65% Consumer affairs Office State Attorney General 50% 54% State banking agency Sales person from the lender Federal banking agency 36% 34% 33% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November Home Improvement Contractors In addition to the questions about home improvement/home equity loans, all respondents answered two questions concerning home improvement contractors. When asked if they have ever had a bad experience as a result of hiring a person or company to make repairs or improvements to their home, more than one in five (22%) said yes. AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 Page 6

10 Similar to the question on home improvement loans, respondents were asked to whom they would turn to for help in getting a complaint resolved about a company or individual that they contracted to do home repairs. Half or more said they would turn to four of twelve sources that were read to them (Figure 9). Figure 9 Where Respondents Would Go for Help to Resolve a Home Improvement Contract Complaint Base: Total respondents who own their own home (Unweighted n=1546) Lawyer or other professional advisor 68% Better Business Bureau 67% Sales person who sold the service 60% Consumer affairs office 50% State Attorney General 44% 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: AARP Consumer Home Equity/Home Improvement Lending Survey, November CONCLUSIONS As in previous research, this study confirms that a large majority of the age 50 and older population own their own home. Thus, they are prime targets for home improvement contractors and home equity lenders. Several results of the survey support the belief that home equity lenders actively market their product to adults age 50 years or older: Nearly nine in ten of the persons interviewed have heard or seen advertisements for borrowing money against their home Almost three quarters have actually received information offering them the opportunity to borrow money against their home AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 Page 7

11 The findings indicate that many of the age 50 years or older may be at risk of unfair and deceptive lending practices: Nearly a quarter of the respondents did not think they had enough money set aside to pay for home repairs; specifically, females, those with an annual household income less than $30,000, those with a high school or less education, and minorities More than a quarter selected their lender based on that lender s solicitation More than half did not talk to more than one lender to compare interest rates and loan provisions before taking out the home improvement loan Respondents in the lowest income group and minorities were most likely not to believe that credit report information affects the ability to get a loan and the loan rate When read a list of possible sources to turn to for help, the majority said that they would go to either a legal or business professional or institution to assist them to resolve complaints against both home equity lenders and home improvement contractors. This finding reinforces the need to ensure that these resources are available and accessible to consumers and the importance of educating consumers about where than can find help if they have complaints about a home contractor or home equity loan. AARP Consumer Home Equity/Home Improvement Lending Survey, November 2000 Page 8

12 11/27/ :53 AM APPENDIX AARP CONSUMER HOME EQUITY/IMPROVEMENT LENDING SURVEY ANNOTATED QUESTIONNAIRE This study was conducted by telephone October 13 - October 31, 2000 among a nationally representative sample of 2114 adults 50 years of age and older. Field work by ICR/International Communications Research of Media, PA. The margin of error is plus or minus 2.6 Base: Total Respondents 50+ (n=2,114) HM-1. Do your own or rent your primary place of residence? Own Rent Don t know Refused 81% 18-1 Base: Total Respondents 50+ Who Own Residence (n=1,700) HM-2. (Asked of total respondents 50+ who own residence) Which of the following BEST describes your primary place of residence. Is it (READ LIST)? A A A A A manufactured or Don t house townhouse condominium co-op mobile home know Refused 85% Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-3. (Asked of total respondents 50+ who own residence that is not a mobile home) Do you own your home outright or are you paying off a mortgage? Own home Paying off Don t outright mortgage know Refused 59% Base: Total Respondents 50+ Who Own Residences (n=1,546) HM-4. (Asked of total respondents 50+ who own residence that is not a mobile home) Do you have insurance on your home to protect against loss in case of fire or other disaster? 95% 4-1

13 Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-5. (Asked of total respondents 50+ who own residence that is not a mobile home) Do you think you have enough money set aside for major home repairs such as replacing a roof? 75% Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-6. (Asked of total respondents 50+ who own residence that is not a mobile home) In the last year or so, have you seen or heard advertisements for borrowing money against your home? 86% Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-7. (Asked of total respondents 50+ who own residence that is not a mobile home) In the last year or so, have you received any information offering you an opportunity to borrow money against your home? 73% Base: Total Respondents 50+ Who Own Residence and Have Received Information (n=1,147) HM-8. (Asked of total respondents 50+ who own residence that is not a mobile home and have received information) Did you receive the offer by (READ EACH ITEM)? a. Phone 38% 60 3 * b. Direct mail c. Door-to-door salespeople * d * e. Any other source f. Television g. Newspaper h. Radio i. Lending institution j. Advertisements (ns)

14 Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-9. (Asked of total respondents 50+ who own residence that is not a mobile home) Thinking about the last 10 years, have you ever taken out a home equity or home improvement loan since 1991? By this I mean a loan that uses your home for collateral. 24% 75-1 Base: Total Respondents 50+ Who Own Residence (n=405) HM-10. (Asked of total respondents 50+ who own residence that is not a mobile home and has taken out a home equity loan or home improvement loan in last 10 years) Where did you get the loan from? If you have taken out more than one loan since 1991, please think of the most recent one. Did you get the loan from a (READ ITEMS)? a. Bank 69% b. Credit union c. Mortgage broker d. Other financial institution e. Consumer loan company/finance company Base: Total Respondents 50+ Who Own Residence (n=405) HM-11. (Asked of total respondents 50+ who own residence that is not a mobile home and has taken out a home equity loan or home improvement loan in last 10 years) How did you select the lender? Was it through (READ ITEMS)? a. An advertisement 15% b. a mail, phone, or door to door solicitation c. Applying to a personal bank or credit union d. Applying to a finance company e. Applying to a mortgage broker f. Other g. Friend/relative

15 Base: Total Respondents 50+ Who Own Residence (n=405) HM-12. (Asked of total respondents 50+ who own residence that is not a mobile home and has taken out a home equity loan or home improvement loan in last 10 years) Did you talk to more than one lender to compare interest rates and loan provisions before you took out the home equity or home improvement loan? 46% Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-13. (Asked of total respondents 50+ who own residence that is not a mobile home) I am going to read a couple of statements. Please tell me if you believe the statement is true or false. (READ FIRST STATEMENT) Do you believe this statement is true or false? How about (READ NEXT STATEMENT)? True False Don t know Refused a. Individuals bill-paying history on their credit record affects their ability to get a home loan. 83% b. Individuals bill-paying history on their credit record affects the interest rate a lender charges them Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-14. (Asked of total respondents 50+ who own residence that is not a mobile home) If you had a complaint about a home improvement or home equity loan, where would you turn for help in getting you complaint resolved? Would you go to (READ FIRST ITEM)? How about (READ NEXT ITEMS)? Yes No Don t know Refused a. A sales person from the lender 34% b. The Better Business Bureau c. The State Attorney General d. A lawyer, or other professional advisor e. The Consumer Affairs office f. A state banking agency g. A federal banking agency h. Any other source i. Contractor j. Lending company k. Elected official l. Bank officer m. TV/news media n. Friends and family

16 Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-15. (Asked of total respondents 50+ who own residence that is not a mobile home) The next questions are about home improvement contractors. Have you ever had a bad experience as a result of hiring a person or company to make repairs or improvements to your home? 22% Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-16. (Asked of total respondents 50+ who own residence that is not a mobile home) If you had a complaint about a company or individual that you contracted to do home repairs, where would you turn for help in getting your complaint resolved? Would you turn to a (READ FIRST ITEM)? Would you turn to (READ NEXT ITEMS)? Yes No Don t know Refused a. The sales person who sold the service 60% b. The Better Business Bureau c. The State Attorney General d. A Lawyer, or other professional advisor e. The Consumer Affairs office f. Any other source g. Courts h. Contractor i. State licensing board j. TV/news media k. Friends/family l. Owner/president of company Base: Total Respondents 50+ Who Own Residence (n=1,546) HM-17. (Asked of total respondents 50+ who own residence that is not a mobile home) Are you, or is your spouse, a member of AARP? 53%