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Date Published : Thursday, May 08, 2008
New research has found that many Australians are completely clueless to how home loans and mortgage repayments work.
The study by MyRate uncovered that as many as 41 per cent of Australians think that they could easily secure a home loan without a steady income, which 16 per cent believed the lender's mortgage insurance would cover them if they became unemployed during the length of the loan.
Also revealed was just how complicated the mortgage process is, with 23 per cent not completely understanding the forms that they fill in when agreeing to a home loan deal.
Lenders' mortgage insurance is usually taken out when borrowings represent more than 80 per cent of the purchase price. At this stage most lenders insist the borrower takes out insurance.
The Herald Sun's John Beveridge wrote in his column: "You can't really blame the person getting the mortgage for thinking that they would get something for paying this premium.
"After all, when you pay for insurance, you normally get something back.
"In this case though, the borrower is "getting'' the ability to borrow the money and nothing more."
Despite this, MyRate managing director Kevin Sherman told the publication that the global credit crunch means that some Australians are becoming more educated about their housing loans.
The number of people who think variable rate home loans only changed with the Reserve Bank's base rate has fallen by 16 per cent over the last year.
Recently, the Reserve Bank held interest rates at 7.25 per cent for a third consecutive month.
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