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4 in 5 hopeful buyers don’t understand key financial concepts

While most Australians dream of owning their own home, the majority of hopeful homeowners admit they don’t fully understand how home loans or mortgage rates work. That’s why we make it our mission to enlighten you during your home buying journey.

They say knowledge is power.

But this week we stumbled across some interesting stats from UBank’s Know Your Numbers survey.

It found that 84% of Australians who are yet to buy a property admit they don’t know enough about how home loans, mortgage rates and deposits work, while 3 in 10 admitted to knowing nothing at all and having no idea where to start.

But if you start by jumping at the first seemingly attractive rate you see advertised, well, that can lead to big problems down the track.

“Entering the property market with little to no knowledge of some essential financial terms and concepts could see Australians falling into common traps or getting themselves into situations they cannot manage,” explains UBank CEO, Philippa Watson.

How we help demystify finance for you

Now, the purpose of this article isn’t to shame anyone who hasn’t already done their homework. Far from it.

Rather, we want to reassure you that when you come to us for a finance solution, we’ll be sure to explain any financial terms or products you don’t fully have your head around yet.

And that’s one of the key differences between us and the big banks.

We’re not just satisfied with matching you up with a home loan, we want you to be confident that it’s the right one for you, and for you to understand the reasons why.

Some of the most common financial terms we explain to our clients

There’s no denying the world of finance is full of jargon and seemingly complicated language.

To help get you started, below are some of the most common financial terms people ask us about.

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.

Got any other finance terms you’d like explained?

If you’re keen to buy your first home but find all the terminology a bit daunting, then please reach out to us today on 02 6021 6600.

We’re always happy to sit down and demystify the home buying process, so that when you do take the leap into ownership, you can be confident that you’re armed with all the knowledge you need.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Make it happen

The staff at MAKE Finance Group are experienced and dedicated to providing our clients with exceptional levels of advice and service.

As a full service finance broker, we can save you time and stress as we negotiate with Banks and Financiers on your behalf. Whether it is asset or equipment finance, business finance and advice or even a home loan, we will go to the market on your behalf and find the best possible deal available.

Let us worry about the financials, as we make it happen for you.

Why Partner with Us?

The staff at MAKE Finance Group are experienced and dedicated to providing our clients with exceptional levels of advice and service.

MAKE Finance Group holds sought after commercial lending accreditations and access to a substantial panel of lenders for both Equipment and Business Finance.

As a finance broker MAKE Finance Group saves you time and stress as we negotiate with Banks and Financiers on your behalf. This allows you to keep focused on your business while we do the finance work.

This ensures you receive the best offers with the objective of saving money and increasing profitability.

Testimonials

Here is what a couple of our clients have said about MAKE Finance Group.
  • Geoff at MAKE Finance Group made the process of purchasing an investment property a seamless process. Thanks for your patience Geoff. I would highly recommend Geoff and his team at MAKE for all your finance needs. Cathy, Warrnambool

  • Geoff and Christine helped me from the ground up with acquiring my first home loan, they helped me from the application process all through to small advice on how to take on the new world I've been introduced to. I am honestly glad to have been referred to MAKE Finance Group, I couldn't have found someone as thorough, professional and friendly to have helped me along the way. Paul, Albury  

  • Geoff and the team at MAKE Finance were unbelievably helpful when we needed to refinance our business loan. After a stressful and confusing ordeal with our existing lender, Geoff made re-financing so easy, and it tool very little work from our end to sort everything out. We are so happy with everything sorted and not having to worry about our finance arrangements. We would encourage anyone with any financing needs to go and see Geoff and the team at MAKE Finance, thanks Geoff! Philip and Jenni, Holbrook

  • Thank you to the team at MAKE Finance Group, for helping me purchase my first truck. I cannot thank them enough as they went above and beyond all my expectations and made the whole process easy and stress free, I would highly recommend them to anyone. Rob, Canberra

  • Applying for a business loan (direct through a Bank) was becoming a stressful and difficult task for us as everything had to be discussed over the phone followed by numerous paperwork. Geoff at MAKE Finance Group was our savior. Your personalised service made the application for our business loan & business vehicle loan so easy. We now operate a very successful business & we could not have done this without you. We love your work! Lloyd & Kristy Franchisee of Jim’s Mowing Wodonga East

  • “MAKE Finance Group were an absolute pleasure to deal with. Right from the very beginning, even when we were just asking questions as to how home loans work and how much we could afford, they made the process incredibly easy and put everything into terms that we could understand. There’s a lot involved with buying your first home, but it felt effortless with the superb help from both Jess & Geoff. MAKE Finance Group definitely come highly recommend from us – thanks guys!” Sophie & Zach, Albury

  • “Buying a new car was a big deal for me as I had a very strong love for my only car of 10 years.  I approached MAKE Finance Group to help me source a loan for my new car, and they made me feel 100% positive about making the change, as the process that they followed to obtain the loan was flawless. They came to me which I hugely appreciated, everything was in order and all follow ups and questions were answered without hesitation. I cannot recommend them enough for their professional and friendly service.” Stephanie, Albury

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