4 out of 5 prospective buyers are unfamiliar with basic financial principles.
While the majority of Australians aspire to purchase a home, the majority of would-be homeowners claim they have a poor understanding of how home loans and mortgage rates function. That's why it's our duty to educate you throughout your home-buying process.
It is said that knowledge is power.
However, we came across some interesting statistics from UBank’s Know Your Numbers survey this week.
It revealed that 84 percent of Australians who have yet to buy a home acknowledge they don’t know enough about how home loans, mortgage rates, and deposits work, and that three out of ten have no idea where to begin.
However, if you begin by leaping at the first seemingly appealing rate you see advertised, you may find yourself in serious trouble down the road.
“Entering the property market with little to no understanding of several key financial words and concepts could lead to Australians falling into typical traps or finding themselves into circumstances they can’t handle,” says Philippa Watson, CEO of UBank.
How we help demystify finance for you
Now, the point of this piece isn’t to make people feel bad for not having completed their assignment. Not at all.
Rather, we want to reassure you that if you come to us for a financing solution, we’ll take the time to clarify any financial concepts or products that you don’t fully understand.
One of the fundamental contrasts between us and the big banks is this.
We don’t simply want you to be content with a house loan; we want you to be certain that it’s the appropriate one for you and that you understand why.
Some of the most common financial terms we explain to our clients
There’s no disputing that the financial industry is riddled with jargon and ostensibly difficult terminology.
Below are some of the most popular financial words that people ask us about to get you started.
Loan to Value Ratio (LVR): LVR is the percentage of the property’s value (as assessed by the lender) that your loan equates to.
For example, if the property you want to purchase is valued at $500,000, and you need to borrow $400,000 to pay for it, the loan is worth 80% of the property value, making your LVR 80%.
Lenders Mortgage Insurance (LMI): LMI is insurance that protects the bank or lender in case you can’t pay your residential mortgage.
It’s usually paid by borrowers who have an LVR higher than 80% – that is, borrowers with a deposit of less than 20%.
Offset account: an offset account is just like a regular transaction account, except it’s linked to your home loan. The money held in the account is counted as if it’s been paid off your home loan, which reduces the balance of the loan and in turn, reduces the interest you need to pay.
And because the offset account acts like a regular transaction account, the money you’ve put in there is still accessible whenever you need it.
Refinancing: refinancing is the process of switching your home loan to take advantage of another, more suitable home loan for your present circumstances, such as one with a lower interest rate that might save you money.
Do you have any additional financial terms you'd want to learn about?
If you’re ready to buy your first home but are intimidated by the lingo, please contact us right away.
We’re always pleased to sit down and de-mystify the home-buying process so that when you’re ready to make the jump into homeownership, you’ll have all the information you need.
To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at email@example.com
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