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Why The Future of Real Estate Lies In Digital Mortgaging

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Despite COVID-19 having caused unimaginable human suffering and economic distress in many parts of the world, the optimists among us like to think the pandemic has some silver linings, mostly with innovations with technology.

Take the real estate industry, for example, it is renown for its laggardness to change and hanging onto its traditional business practices especially when it comes to using technology. However, the pandemic and various levels of lockdown forced the hand of many real estate agents to do everything online or face going out of business!

The action of buying, selling and renting property is typically cumbersome and involves a heavy paper trail. Industry experts have been saying for years that the time is ripe for digital disruption – not only to make the painstaking purchase process easier and less frustrating for buyers and sellers but also to reduce overall costs and ease the environmental burdens of a paper-based industry.

Thanks to COVID-19, real estate agents worldwide have quickly resorted to overseeing the property listing, marketing and purchase process digitally. For marketing using video walk-throughs instead of open home, viewings have been a gamechanger and this practice will continue even when the pandemic is behind us.

Plus for some time now i.e. years, lenders have been keen to cut out the middle-man i.e. the mortgage broker who takes a commission for the borrower introduction. Now with a digital mortgage, there is light at the end of the tunnel with mortgage brokers possibly a profession in a steep decline and eventually eradicated.

While many property buyers including real estate investors who buy homes more frequently than homeowners, using their favourite mortgage broker will still have appeal. Being able to text your broker and tell them to find funds for a new property purchase and that’s the job done is too attractive. However, for everyone else, the digital mortgage may just be among the many standout innovations likely to stick around in a post-COVID world.

What Is A Digital Mortgage?

In short, a digital mortgage is one that utilises technology to produce, transfer, and store a mortgage, without using a single piece of paper. It involves no paper loan file, no loan officer, and no closing agent. The entire process is handled digitally, using 3rd party data aggregators or the use of an eNotary during closing. With any luck, the future of mortgaging lies in the digital realm, and here are just a few reasons why…

It eliminates the need for manual processes

The most frustrating part of the mortgaging process is having to sign what seems like a million and one extremely repetitive documents, scanning, uploading and submitting those documents, coordinating with agents and third parties to do so. With the advent of blockchain technology, mortgaging can move increasingly into the digital space using smart contracts and de-centralised ledgers that make the process quicker, more secure, and more cost-effective to achieve the exact same outcome.

It reduces the need for paper

The average mortgage process consumes roughly 280 pages (bearing in mind that loan documents and length vary depending on a number of factors), with most mortgage processes ending with an applicant sifting through hundreds and hundreds of pages only to sign the final page. According to a 2017 article published by the Chicago Tribune, that equates to almost 2.2 billion sheets of paper annually from mortgages alone – the equivalent of over 260,000 trees in the US alone. For environmental reasons alone, shifting to an entirely digitised mortgage process would have a significant impact on global warming and environmental conservation.

Reduces labour costs

Moving to a digitised mortgage process would also eliminate the need for a physical third party to approve the loan and oversee the signing process. For lenders, who are constantly seeking new ways to optimise their business and reduce mortgage production costs,  digital mortgages are a shining light.  If this online process does it all and lenders earn the trust of their clients and also more business who’s to say digital mortgaging won’t see massive upheaval in the home loan market.

Summary

Among the despair and suffering from the pandemic, there are a few innovations that give us reason to be joyful.  Watch this space, even the most reluctant home buyers will make the switch to digital mortgages and then wonder what all the fuss was about!

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