/Majority of property seekers know little about process of buying a home, research shows

Majority of property seekers know little about process of buying a home, research shows

Shaking Hands

Many Aussies seeking their next home don’t understand key financial terms.

It’s the biggest purchase they will ever make but the majority of Aussie home seekers admit they know little about how the property market even works.

A recent survey of more than 1000 homeowners currently in search of their next property revealed the bulk did not understand a variety of key financial concepts and were scrambling to educate themselves.

Almost half of those surveyed said they did not know exactly what an offset account was, nor did they fully understand what equity was.

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Just over 40 per cent did not understand what it meant to refinance and a similar proportion of prospective buyers admitted they weren’t sure what to do at an auction.

Almost eight in 10 next home buyers were taking steps to better educate themselves on home financing, according to the Westpac research.

Westpac general manager of home ownership Will Ranken said a lack of understanding of the market meant home seekers were not making informed decisions.

“It’s surprising to see the number of Australians who aren’t familiar with key home loan concepts,” he said.

Some home seekers may simply be a little rusty when it came to the property market, Mr Ranken added.

“Perhaps it’s been many years since the homeowners bought their current home, or a partner might have managed these discussions previously,” he said.

New home construction framing

Increased home construction is presenting home seekers with more opportunities to buy.

Auctions remained an area where most buyers were in the dark. More than half of those surveyed said auctions “scared” them and they would prefer to purchase by private treaty.

Mr Ranken said the only way buyers could conquer that fear was through research.

“Auctions can be daunting, but again, by doing their homework and being well-prepared, home buyers can feel confident to make the most of current opportunities.”

FINANCIAL CONCEPTS

Equity: this indicates your financial interest in a property. The equity in a home is the difference between its value and the amount owed on the mortgage.

Refinancing: the process of taking out a new mortgage to repay an existing loan.

Offset account: option often available on home loans to help reduce the cost of interest payments. The money in a transaction account acts the same as if it were a mortgage account, reducing the balance of the loan on which interest is calculated.

Bridging loan: normally a short-term loan to help the buyer finance the purchase of a new home while their current property sells.