The mortgage process is best known by its lengthy procedures and paperworks. If you or anyone you know have gotten a mortgage recently, you’d be aware that applying for and closing one is a tedious process. Not only are documents to be scanned and your credit score checked, but you also have to either meet in person or have several telephone calls or online chats with a loan officer. For many, the aforementioned mortgage features are dreadful, and as a result some have welcomed the digital or virtual version of the same. But can an online mortgage speed up the overall process for borrowers and more importantly what are the pitfalls that are associated with this option? As can be imagined, this is a relatively new process for some financial institutions and isn’t without issues or disadvantages. Consequently, the purpose of this article is to:
- Explore, define and explain online mortgages and what they entail as well as,
- Give details as to how these types of mortgages usually work.
What is an online mortgage?
An online mortgage is a loan that can be obtained without the borrower having to visit the lender’s physical office. It is sometimes called a digital mortgage and, as can be expected by the name, the entire experience— from loan application to closing— has been designed to be completed electronically.
Within the UK online mortgages are best known among what are called ‘robo advisers’ or online mortgage brokers. What these brokers do are the following:
- Allow borrowers to carry out most of the mortgage comparison and application process online, without speaking to a mortgage broker in person or over the phone. And,
- Offer 24 hour mortgage services.
How these platforms work is by allowing potential borrowers to submit details about their mortgage search to a chatbot; following which they’ll either fill in an online form, or select options in an app. It is worthy to insert at this point that online mortgage brokerage doesn’t eliminate the need for human mortgage brokers. Often, paperworks are submitted to the human brokers for them to ensure the veracity and legal bond of the documents that accompany applications.
How do Online Mortgage Brokers work?
Below are the steps that normally accompany the online mortgage process. Please note, however, that these steps may vary depending on the brokers. Later in this article we will isolate the steps that are shared, regardless of the platform. For now let’s consider a combination of processes for a general idea of what to expect:
To begin, let’s consider these five steps by a typical broker that would take more than a day to offer results:
Steps:
- Quick eligibility check- compare your credit profile and personal details with the eligibility criteria of top lenders.
- Manage your application online- complete your profile, upload documents, interact with your adviser and give live updates.
- Expert mortgage- speak to a qualified mortgage adviser.
- Upload documents- Securely upload, view and manage your documents online. No messy paperwork is involved in this part of the process.
- Track online- Monitor the progress of your loan and interact with your adviser.
Now, let’s consider a typical broker that offers a mortgage product within minutes:
Steps:
- Check your eligibility- to do this, you are required to answer a few questions about yourself and what you think you would like to borrow.
- Decision of Principle- through this step the broker will let you know whether they can lend you how much you would like to borrow.
- Property check- here you are required to give details about the property you want to buy or remortgage.
- Choose your mortgage- from this option you are able to choose the mortgage product that’s best for you.
- ID verification- this step requires you to upload your ID e.g passport, driver’s license or birth certificate to an online portal.
- Mortgage offer- if you and your chosen property meet the broker’s lending criteria, they will agree to the mortgage offer they made in the decision of principle.
Lastly, let’s consider this sample broker, that’s more transparent as to how it coordinates with external lenders. Their steps are as follows,
Steps:
- Sign up to create an account.
- Complete your online profile.
- Wait for an expert to find the right deal for you.
- Upload your documents. These include, but are not limited to:
- payslips
- bank statements
- proof of ID
- proof of address
- proof of deposit
- The broker will then send your application to a lender and assign you a case manager.
- The case manager will, in turn, chase the progress of your application.
- Request for mortgage protection becomes available at this part of the process.
- Review your mortgage offer.
- Complete your home purchase, and
- Await further instructions on remortgage options that are open to you.
Pros and cons of getting an online mortgage:
Pros
- Faster approval process for highly qualified borrowers.
- Ability to check the status of your loan on a mobile app or laptop whenever you want.
- May be able to complete the process with little to no paperwork.
- Lower/no fees.
- The use of technology and algorithms mean the mortgage options can be found more quickly than in a manual human search.
Cons
- Unable to meet with your loan team in-person.
- Could have multiple people involved in your loan throughout the process.
- May be harder to get an online mortgage approval if you have a spotty job history or poor credit.
- Might put your personal and financial information at risk of being stolen or hacked.
- Fully automated services can sometimes overlook individual circumstances – consequently, the cheapest deals aren’t always the most suitable options.
- Some online services offer calculators to give you an idea of how much you’ll be able to borrow, but in most cases this can’t be classed as actual advice, and isn’t tailored to your situation.
Conclusion:
The online mortgage process, regardless of the platform, has one or more of the following:
- A marketplace for mortgage lenders.
- An application for an online mortgage.
- A loan estimate
- Required documents to upload to the platform.
- Processing and approval criteria and,
- Electronic closure of the loan.
Deciding on whether or not an online mortgage is advantageous for you, a family member or friend is case specific. It is worthy to note, at this juncture, that not all borrowers are a fit for the online mortgage approval process. If your case is straightforward; you work at unsociable hours; have a good credit score; and are particularly interested in remortgaging, online mortgage brokers are the better option. If, however, your case is more complicated, you’ll benefit more from a conventional mortgage broker. Still unsure as to whether or not to go the online route? Call one of our experts and we’ll advise you based on your circumstances and or needs.