While first home buyers (FHBs) in Australia may seem confident about their financial decisions, it is still necessary for them to fully grasp and have a deeper understanding of financial literacy.
Australian Broker reported that based on an ME Bank poll, 70% of FHBs are assured with their financial decisions while 50% are confident when it came to their property buying process.
However, Resolve Finance managing director Don Crellin said it is important that these FHBs fully understand financial literacy, given that around 61% of those surveyed by the ME Bank failed the basic property buying literacy quiz.
“It’s worrying that first home buyers feel confident signing on the dotted line with a low understanding of financial literacy behind them,” he told Australian Broker.
“They could be signing off on financial decisions that are inappropriate for their circumstances, ones which will really cost them in the long run.”
With this, Crellin identified seven important things FHBs have to know about the market. For one, Crellin said buyers have to understand that lenders mortgage insurance covers the lender and not the borrower.
Also, Crellin said buyers have to factor in other costs such as stamp duty and conveyancing fees, which may need to be deducted from their deposit.
Another important thing FHBs have to know is the auction process, which moves at a different phase than that of a private deal. For instance, there is no cooling off period on an auction buy and buyers have to settle the deposit on the auction day itself.
Lastly, Crellin stressed the importance of mortgage brokers in helping buyers identify the most appropriate lender and product. Brokers are also helpful in negotiating the loan on a buyer’s behalf and doing all the research needed about the property or the mortgage product.