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First home buyers do not know as much as they think they know about buying property, according to recent research.
Home loan lender ME Bank tested the knowledge of 1,000 Australians who are looking to buy their first home or have already purchased an owner occupied or investment property.
Nearly 70% of said they felt confident about making financial decisions. Around 50% said they were confident when it came to the property buying process and related costs.
When given a basic property buying literacy test, 61% of first home buyers failed, compared to 27% of owner occupiers and a quarter of investors.
As seen in research and surveys in the past, borrowers are still most confused about lenders’ mortgage insurance. Eighty-eight percent of respondents believed it covered the borrower and not the lender.
The survey also showed that 85% of first home buyers did not know there is no cooling off period after buying a house at auction. Even 66% of investors thought this period existed.
Seventy-eight percent of first home buyers did not know you need to pay a deposit on auction day. This was still a high figure for owner occupiers (53%) and investors (54%)
Sixty-six percent of first home buyers did not know what conveyancing meant and 63% did not know what an offset account was.
ME head of home loans Patrick Nolan said overconfidence and low financial literacy is a risky combination that could be costing first time buyers.
He added, “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.
“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.”
