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Learn more about home loans to secure a good deal

No knowledge is ever wasted. In fact, basic financial knowledge can go a long way in helping you find a competitive home loan deal, and save thousands of dollars over the life of your loan.

 
Easy way to save more money - Financial knowledge
 

However, it is rare to come across a layperson who enjoys dabbling in numbers. Most people find it boring or tedious to work with numbers, and prefer to ‘guesstimate’ financial decisions, including buying a house, than basing them on sound facts and figures. Of course, you already know that such an attitude could be bad for your financial health.

Yet, new research by home loan lender ME Bank reveals alarmingly poor levels of financial, more specifically, basic property buying literacy.

Based on a survey of 1,000 first home owners, owner-occupiers and investors, it was found that while nearly 70 per cent of the respondents felt confident about making financial decisions and 50 per cent said that they understood the property buying process and related costs, surprisingly, a large percentage of the group did not understand basic property-related terms.

The first home buyers fared worse than owner-occupiers and investors, with 88 per cent of them unsure about the meaning of lenders mortgage insurance (LMI).

To make things clear, LMI is what your lender might ask you to pay if you take out a low deposit home loan, to protect their interests. Thus, LMI protects the lender and not the borrower, as is commonly believed.

The survey also found that 85 per cent of first home buyers did not know that there is no cooling off period when buying a home at an auction as opposed to 66 per cent of investors. 78 per cent of first home buyers weren’t aware that they needed to pay their deposit on the auction day.

These findings indicate that many Australians may be making poor financial choices when it comes to their home loan. Some of the more shocking results of the survey include ignorance of what a comparison rate is (74 per cent) and not understanding compounding interest (42 per cent). Over a quarter of the respondents (36 per cent) were not even aware of the basic fundamental that a shorter loan term reduces the amount of interest paid.

Yes, paying off your mortgage in 10 years instead of 30 can save you a considerable amount of money in interest. However, your monthly repayment amount would also increase because of the reduced loan term. (Here are some easy hacks to pay your home loan sooner.)

According to ME Head of Home Loans, Patrick Nolan, “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.”

ME Head of Deposits and Transactional Banking, Nic Emery, says that “…banking is part of our daily lives and understanding the basics is a life-skill, like being able to cook and catch public transport.”

Well, at HashChing, we believe that the first step to secure a good home loan deal is educating yourself. If you are a first home buyer or a novice investor, these tips will help you get a strong foothold in the property market. In fact, existing home buyers may also benefit from these tips:

Understand property jargon – Understanding common property buying terms will enable you to wade the waters in confidence. Here’s a jargon-busting article to get you going.

Take calculated decisions – With so much choice on offer, it could be hard to figure out the best home loan deal for you. Use our financial calculators and tools to crunch the numbers and make informed decisions.

Learn about home loan features – Having additional features in your home loan, such as an offset account, free extra repayments, etc. could potentially save you time and money on your home loan. Get in touch with a mortgage broker to understand your options better.

Compare home loans – Cheapest isn’t always the best. Compare home loans online to find the best one for your requirements. Pick your top deals on HashChing and view them side-by-side to get an idea of what each one is going to cost you. Existing home buyers can find competitive refinancing deals that can potentially save them thousands of dollars in interest. Use this calculator to find out how much money you could save by switching your home loan. Or, speak to a mortgage broker for expert guidance on your home loan journey.

About HashChing
HashChing is an online mortgage marketplace that enables Australian homebuyers to compare broker pre-negotiated home loan rates online. Aspiring home borrowers can get in touch with our verified broker partners online to have their queries answered by experts in a transparent manner, free of cost. Click here to browse our broker database.

 
By Vidhu Bajaj,
HashChing Content Writer
 

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HashChing is helping Australians by providing access to pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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