# 48% of people can't calculate the Loan to Value of a mortgage



## Brendan Burgess (22 Jun 2016)

New research today from Mortgage Brain Ireland 


*13 June, 2016: *New consumer research has uncovered a serious mortgage literacy problem in Ireland, with almost seven in ten consumers not knowing how much interest they will pay a lender over the life of a mortgage.  When asked to calculate the Loan to Value (LTV) for borrowings of €200,000 on a house worth €250,000, almost half (48%) answered incorrectly.

The research was commissioned by Mortgage Brain Ireland, the leading provider of mortgage software for brokers, lenders and consumers, and the company behind the ‘IrishMortgages’app, Ireland’s first free mortgage comparison and calculator app.  Undertaken by Coyne Research, the survey involved over 1,000 adults aged 18+ year, comprising people who currently have a mortgage, those who don’t have a mortgage and those likely to take out a mortgage in the next 12 months.


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## michaelm (22 Jun 2016)

Brendan Burgess said:


> 48% of people can't calculate the Loan to Value of a mortgage


That I can believe, although somebody told me that 37% of statistics are made up on the fly.  Many people are rubbish at maths, I asked my wife what the square root of -1 was but she hadn't an iota.


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## Monbretia (22 Jun 2016)

I'm surprised it's that low, I would have said it would be higher, many bank staff couldn't figure that out for you.


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## Mrs Vimes (22 Jun 2016)

Brendan Burgess said:


> with almost seven in ten consumers not knowing how much interest they will pay a lender over the life of a mortgage.



I always think people who focus on how much interest they will pay over the 25 years or whatever their mortgage will run have no grasp of the time value of money and show a level of financial cluelessness which leads to poor decisions.

I have seen comments on other forums such as that taking out a loan for home improvements over 5 years at 10% is better than over 25 years at 4% because 25 times 4% is 100% interest whereas 5 times 10% is 50% so that loan would be cheaper in the long run.


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## Dan Murray (22 Jun 2016)

My sense has always been that about 50% of the population struggle with relatively simple math and that the other 2/3rds often ain't much better either.


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## Boyd (22 Jun 2016)

michaelm said:


> That I can believe, although somebody told me that 37% of statistics are made up on the fly.  Many people are rubbish at maths, I asked my wife what the square root of -1 was but she hadn't an iota.


LOL. That's a good one.....i  (and -i) like it :-D


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## Brendan Burgess (23 Jun 2016)

Mrs Vimes said:


> I always think people who focus on how much interest they will pay over the 25 years or whatever their mortgage will run have no grasp of the time value of money and show a level of financial cluelessness which leads to poor decisions.
> 
> I have seen comments on other forums such as that taking out a loan for home improvements over 5 years at 10% is better than over 25 years at 4% because 25 times 4% is 100% interest whereas 5 times 10% is 50% so that loan would be cheaper in the long run.



Agree fully. The Mortgage Brain press statement says: 


"According to the survey results, there was also a widespread gap in knowledge across the various groupings with more than half (55%) of the population unable to correctly note the impact on interest paid on a 25 year mortgage versus a 35 year mortgage."

I have asked them twice for copies of the questionnaire and the "correct" answers. 

They have not replied, so I suspect that Mortgage Brain themselves might not understand the time value of money. 

Brendan


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## trojan (23 Jun 2016)

Brendan Burgess said:


> Agree fully. The Mortgage Brain press statement says:
> 
> 
> "According to the survey results, there was also a widespread gap in knowledge across the various groupings with more than half (55%) of the population unable to correctly note the impact on interest paid on a 25 year mortgage versus a 35 year mortgage."
> ...


Would it be an idea to give some examples so that we can all learn how to calculate this.


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