It can take up to six weeks for a home loan to be fully approved and settled. While some lenders may process a mortgage application faster than others, you can still expect a waiting period of at least two weeks to know the fate of your mortgage application.
But what if you needed to move faster with your home loan?
One of the options available to you is applying for a digital home loan that could take as few as ten minutes for approval, according to Unloan.
What is a digital home loan?
A digital home loan refers to a mortgage that can be managed online from end to end, typically using a smartphone app.
Applying for a traditional home loan requires a borrower to jump through multiple hoops. From filling out numerous applications to providing copies of various documents, the process is lengthy and cumbersome. Even lenders take time to manually verify and analyse your records, which can delay the approval process.
Digital home loans simplify the mortgage application process by using technology to automate some steps, leading to faster approvals and a better user experience for some.
How do digital home loans work?
A digital home loan isn’t much different from a traditional home loan in the way it works. The main difference between digital and traditional home loans lies in the application and approval process.
Unlike regular lenders, digital lenders use innovative technologies like open banking and third-party app integrations to make your home loan journey faster and seamless. While most of the steps followed in the approval process are the same as traditional lenders, they are completed much faster due to technology integration, leading to quicker approvals. For instance, you’re not required to provide printouts of your past bank statements or other documents. A digital lender will typically use open banking to review your past transactions and get an idea of your income and expenses. They also use a variety of tools to analyse your spending habits to understand how likely you’re to default on your mortgage.
Some lenders might automate the property valuation process by using online databases offered by property companies instead of hiring a person to physically evaluate a property. Digital credit checks and biometric identity verification can further speed up the process.
Do traditional lenders also offer digital home loans?
Yes, some traditional lenders do offer digital home loans, like Unloan offered by the Commonwealth Bank. However, the sector is primarily dominated by digital lenders or neobanks that almost entirely operate online, mainly through smartphone apps.
Neobanks typically offer limited services and don’t have to deal with the expenses of managing traditional branches or even ATMs. These savings can be passed onto customers in the form of reduced costs, enabling digital banks to offer competitive rates and fees.
Are there any benefits of digital home loans apart from faster processing times?
If you’re someone who’s comfortable with technology, a digital home loan can be a convenient option that literally brings your mortgage to your fingertips. However, if you’re someone who prefers to bank face-to-face or you’re not very comfortable managing your money online, a digital home loan might not be suitable for you.
Apart from convenience, digital home loans are often cheaper than traditional home loans. As digital lenders have fewer overheads, they can pass on some of the savings to their customers in the form of lower interest rates and fees.
What are the cons of a digital home loan?
Digital home loans are not for people who are not comfortable with technology. Besides, digital home loans are not suitable for all types of borrowers. They are generally suited to borrowers who fit the standard home loan eligibility criteria, such as a salaried income, a good credit score, and a minimum 20% home loan deposit.
If you don’t quite fit the bill, you may not be eligible for a digital home loan. For instance, if you have a low deposit or there’s bad credit on your file, you may find that you can’t apply for a digital home loan. However, you can always speak with a mortgage broker to help you find a mortgage suitable for you. Even though the approval process could take longer when you apply offline, a mortgage broker can make the process seamless by organising your paperwork and filing your application promptly.
