Aussies are ‘clueless’ about buying first home, ME research shows
First home buyers don’t have the necessary property buying knowledge needed to make good investment decisions, recent research from home loan lender ME has found.
Of 1,000 first home buyers surveyed, more than half failed a basic property buying literacy quiz despite nearly 70% saying they feel confident about making financial decisions.
ME Head of Home Loans Patrick Nolan said this overconfidence could really be costing first-time home buyers.
“It’s difficult enough for those trying to get their foot in the door to save up a deposit and decide where to buy. A lack of necessary property buying knowledge is sure to increase the risk of young Aussies being caught out with unexpected costs, adding to the existing stress,” said Nolan.
ME’s research found that 85% of first home buyers didn’t know that there’s no cooling-off period when buying at auctions, and 78% didn’t know that you pay the deposit on auction day.
It wasn’t just the first timers that needed to become more financially literate, with owner occupiers and investors lacking knowledge in the field too.
Close to 65% of this group were unsure of the key things that contribute to the amount of interest you pay on a home loan, but by understanding factors like the interest rate, loan term and loan features better they could potentially save on interest repayments.
“Financial literacy is a valuable asset and one of the biggest money savers over time, especially when it comes to buying what is likely to be the biggest investment of your life,” said Nolan.
One thing the majority of owner occupiers and investors did know was that the buyer pays stamp duty, not the vendor. They also understood the concept of building up equity in your home, and that you generally pay less interest on a 10-year home loan in comparison to a 30-year loan.
Some of these things can make a big difference to how much borrowers pay on their loan. Mozo’s mortgage repayment calculator shows that on a $300,000 home loan over 30 years, a borrower with the average interest rate of 4.35% would pay $237,637 in interest over the life of the loan. In contrast, on a 10-year loan, they’d only be paying $70,501. That’s a total saving of $167,136 in interest, although it’s important to remember that a shorter loan term means higher monthly repayments.
If you’re a first home buyer, owner occupier or investor, you should consider these tips before you purchase a property.
- Research home buying terminology and rules. Jargon is confusing at the best of times and it’s the last thing you need to worry about when looking for a home. Mozo’s home loan terms guide will help you get started with the basics and break down the terminology.
- Crunch the numbers. With so many options out there, it can be tricky to figure out which home loan is best for you in the long run. With Mozo’s home loan comparison calculator, you can put your top picks side-by-side to see which will save you the most money.
- Choose your features. When looking for a loan, you should not only look at the best rate, but consider competitive features too. Having an offset account, free extra repayments or the option of a redraw facility could save you on interest long-term.
- Find a great deal. Once you understand the basics of home loans, Mozo’s home loan comparison table will help you compare mortgage deals to find the right one for you and understand what your monthly repayments could look like.