New technologies have many advantages. In just a few seconds you can open a bank account with a selfie, block your phone with your fingerprint, turn on the heating and do your tax returns.
However, it is not as simple as it seems when it comes to signing a mortgage. Experts acknowledge that progress is being made in this area: you can apply for a loan for the purchase of a home on the internet and even receive approval from a bank. Although we can now talk about 100% online mortgages in Spain, there’s still a long way to go until they are simple to contract... especially from the customer's point of view.
Despite the fact that traditional banks such as Santander and BBVA allow you to apply online and that online entities such as ING, Openbank (Santander) or Coinc (Bankinter) allow you to go even further in the process, idealista’s mortgage service idealista/hipotecas remind us that "a 100% online mortgage means that the customer has to do everything, among other things digitize and upload their documentation; mortgages are a complex and slow product, which generate many doubts and require interlocutors with whom to talk to resolve any doubts that may arise".
Remember that when we formalising a loan for the acquisition of a property, you need to provide the banking entity that finances the operation with a lot of papers: photocopies of the ID card of each one of the holders and parties involved, your tax returns, your latest payslip or pension payments, a receipt of the IBI property tax if you have other properties or the rental contract if you are leasing. That’s not to mention that the entity will also require the appraisal of the property that is the object of the operation and that to formalise the mortgage loan, a notary’s signature and the inscription of the property in the Property Registry is required.
In addition to the time you should take to prepare and send all these documents to the bank, users need a direct interlocutor to help them through the process. "The vast majority of clients do not have a thorough enough knowledge of the mortgage market that they understand the entire contract and can complete the process, which is often long and complex. Currently, banks pass all the workload to the consumer, which limits the attractiveness of the offer if they are not given alternative channels," argues idealista/hipotecas.
Specifically, once the bank receives the client's request, the risk committee analyses all the documentation and either accepts or rejects the credit (the online verdict is practically immediate, whereas the traditional one takes approximately one week). If the result is favourable, the entity will send the customer a personalised form with the details of the offer for the customer to accept. Once the user accepts the offer, and after carrying out the appraisal of the property and validating all the documentation, the bank sends everything to the notary to prepare the deed, a document that the user must review before signing it definitively.
It is in these last steps of the process that the customer may have doubts of this kind: will the contract contain any unfair terms? Do I understand all the risks involved in signing the loan contract? Who do I complain to if any problems arise?
That’s not all, because another of the drawbacks of the online process is that the future mortgage holder could close the door to an improvement in the conditions of their loan. Although this is an exceptional time for both variable- and fixed-rate mortgages, banking entities are becoming more and more concerned with making loans that are virtually tailor-made for the client and are more likely to improve their initial offer and fight for it when they meet the client. So much so that, according to data from idealista/hipotecas, traditional banks are offering variable-rate mortgages at an average interest rate of Euribor +0.89%, compared to Euribor +0.99% for most online banks.
Does all this mean to say there is no point in automating the mortgage process? Not quite. It is a very positive thing as long as it meets two criteria: that it has more advantages for the client than for the bank and that it is an alternative, not the only way to contract a loan to buy a house.
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