By Gil King
HOME ownership is omnipresent on the wish lists of Australians and governments have sought for some time to provide incentives for people to secure a foothold in the property market.
Grants for first-time buyers, with regional bonuses and stamp duty concessions, have assisted many with their first rung on the property ladder.
For all but a few, taking that first step involves dealing with a bank or other financial institution and a commitment to a mortgage.
Reading an ME Bank report published in late June, it seems that many homebuyers are making purchases blindfolded or at best, with blinkers on.
That bank’s survey of 1000 Australians looking to buy, or having recently bought first homes, found 61 per cent of them couldn’t pass a basic banking literacy test.
Around two-in-three didn’t understand the meaning of conveyancing, and perhaps more alarming, the concept of an offset account.
More than eight in every 10 did not grasp the concept of lenders’ mortgage insurance or that there was no cooling off period after buying at auction.
Seventy-eight per cent didn’t know that bidding successfully at auction requires an accompanying deposit.
Despite this, nearly 70 per cent of first home buyers claim to be confident about making financial decisions and about 50 per cent say they understand purchasing process and associated costs.
One would expect that owner occupiers and investors would score higher on this test, but more than a quarter still couldn’t hit the pass mark of 50 per cent.
Leaping from the diving board before checking there is water in the pool is not recommended.
There are many websites that can educate prospective buyers about the things they need to know. If in doubt, ask an accountant or a financial planner or talk to a bank.
For our part, the Real Estate Institute of Victoria invests a lot of time and energy in the training of real estate professionals, believing that an informed property sector benefits not only agents, but buyers and sellers too.
– Gil King is the CEO of the REIV.