Lending process ‘shrouded in mystery’ for FHBs: research
According to a major brokerage, first-time buyers would like more help choosing and applying for a home loan.
A new study by Mortgage Choice has found that nearly three-quarters – or 71% – of first-time home buyers (FHBs) want more support when making decisions about financing a real estate purchase.
Additionally, 49 percent of FHB said choosing and applying for a home loan is the number one area of the home buying process where they need the support of others.
Of those FHBs who would need more support, 39% would like someone to guide them through the loan process, while 26% need someone to build their knowledge and confidence.
The data – which is based on an online survey conducted by global market research firm CoreData on behalf of Mortgage Choice of 1,023 respondents aged 21 to 60 who are either FHBs or owner / investors – showed showed that 32% of FHBs have minimal confidence “in understanding the characteristics of home loans best suited to their needs, while 57% said they felt” very “or” reasonably “confident.
Meanwhile, 11 percent of respondents said they had no confidence in their ability to distinguish which home loan was right for them.
Mortgage Choice has listed the top five challenges identified by FHBs in obtaining a home loan, including:
- Understand how the whole process works (47%);
- Make sure they get the best deal possible (46%);
- Make sure they are eligible for the loan amount and the property they want to buy (45 percent);
- Determine what they can comfortably afford to repay (41 percent); and
- Understand what government support (if any) they are entitled to (37 percent).
Almost half depend on brokers
When it comes to seeking support, half of all FHBs said they rely on family, friends and co-workers, while 46% seek advice from mortgage brokers and 36% rely on online information.
Commenting on the results, Susan Mitchell, CEO of Mortgage Choice, said research confirmed that obtaining a home loan is a “shrouded in mystery” process for many FHBs.
She added that while historically low interest rates could benefit FHBs, the research has highlighted the significant obstacles this cohort faces in understanding how the buying process works.
“Mortgage brokers are experts in real estate lending and not just when it comes to buying a home and the mortgage lending process,” Ms. Mitchell said.
“Brokers understand the uncertainties that first-time homebuyers face and are able to break the process down into simple, jargon-free steps that can be so confusing for homebuyers.”
“Taking out a home loan is a major financial commitment, and first-time buyers rightly want to be sure they have the loan in place that meets their needs. Brokers understand this and will provide simple explanations of why they are recommending a particular loan or lender.
“It’s incredibly stimulating for first-time homeowners, who can make an informed choice about the mortgage that best suits their situation.”
Ms Mitchell said FHBs can experience “information overload” when searching online, or may receive conflicting information from family and friends, which can leave them overwhelmed and with little clarity.
“Knowledge really is power when it comes to buying a first home and an experienced mortgage broker will be the mortgage expert by your side throughout the process,” she said. declared.
“Not only are mortgage brokers constantly up to date with the ever-changing demands of lenders, but they also act as a mentor to first-time buyers, explaining the home loan process, taking the time to answer questions and by guiding first-time buyers through the steps to follow to prepare for a home loan. “
The results came at the same time as new figures released by Mortgage Choice, which revealed that borrower apathy towards mortgage interest rates has gradually increased over the years, with only 46.5% of borrowers know their current interest rate in 2020.
[Related: More Aussies ‘in tears’ during house hunting]
Malavika Santhebennur is the Mortgage Securities Reporting Editor at Momentum Media.
Prior to joining the team in 2019, Malavika held positions at Money Management and Benchmark Media. She has been writing about financial services for six years.