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New research has shown that a majority of first home buyers are financially illiterate. Resolve Finance managing director Don Crellin explains what conversations brokers should be having with first home buyers to help overcome this.
The ME Bank recently found that while 70 per cent of respondents to their survey said they felt confident about making financial decisions and 50 per cent said they were confident when it came to the property buying process and related costs, 61 per cent of first home buyers failed a property buying literacy test.
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It’s worrying that first home buyers feel confident signing on the dotted line with a low understanding of financial literacy behind them.
They could be signing off on financial decisions that are inappropriate for their circumstances, ones which will really cost them in the long run.
Financial literacy is one of the biggest money savers over time, especially when it comes to the biggest investment of your life.
Understanding the real costs associated with buying a home, in addition to the purchase price, is imperative.
We know how hard people work to save a house deposit, only to find they need to take a string of other fees out of that sum.
The changing lending environment — including amendments around interest-only loans, expenses and the introduction of other guidelines such as loan-to-income ratios — has actually yielded a positive shift.
The discussion and media reporting around changes in the financial landscape have encouraged deeper conversations and helped to improve financial literacy across the board.
Ultimately, it leads to a more informed and educated first home buyer and it is strengthening what we will achieve in the longer term with the changes that are flowing through today.
Here are seven things all brokers should tell home buyers before they take the plunge:
