Advantages and disadvantages of an online mortgage
Depending on your situation, a home loan could be the biggest line of credit you can get in your life. It is therefore important to be 100% confident when applying for a mortgage, whether online or at a bank branch.
Online home loans are becoming increasingly important and popular, especially in response to COVID-19, with traditional banks and dedicated online lenders offering paperless applications that you can complete without leaving your living room.
If you are planning to apply online – from a digital-only lender or a traditional bank – be sure to read these pros and cons of online home loan applications first.
How to apply for a mortgage online?
While you don’t necessarily have someone to walk you through every step of the way, applying online can be fairly straightforward. Many online lenders also have a dedicated customer support line or home loan expert that you can get in touch with for assistance.
The documents and information required may differ depending on the lender and your personal finances, but there are a few key things you will want to have with you from the start. These include:
- Income verification by PAYG
- Employer confirmation form (or ABN and TPS registration if self-employed)
- Credit card and personal loan statements
- Bank and savings account statements
- pieces of identity
- Home loan statements for the current loan, plus current board rate notice or certificate of title (if you are a current homeowner and considering refinancing online)
Like all modern wonders, there are potential benefits and issues that can arise during the online home loan application process. So always keep your financial needs and personal preferences in mind when choosing the right mortgage for your home buying needs.
The advantages of applying for a mortgage online
- You might get lower interest rates and fees
You may be thinking: Why are online mortgage rates lower? Well, the theory is that because the lender saves on overheads like physical branches, he can offer lower rates and less fees.
But keep in mind that you may not be eligible for the best deal. For example, you might not have the loan-to-value ratio (LVR) required to get the highest interest rate available.
If your smaller deposit comes with a higher interest rate and Mortgage Loan Insurance (LMI), the overall cost of the home loan may not be as low as that of a traditional mortgage. So, rather than assuming, be sure to research and compare home loan options before you apply.
- Applications can be simpler and less time consuming
Being able to securely and efficiently handle things like identity verification, credit checks, and other paperwork is a boon for many tech-savvy and time-constrained consumers. When done right, online requests are made so that consumers can understand them without the interpretation of a mortgage broker or banker.
- You can manage your loan digitally
This is a big plus for borrowers who do most of their banking and budgeting online. It’s also great for shy homeowners who just want their questions answered via email or a quick app message.
Disadvantages of online mortgage application
- Online applications are not suitable for all borrowers
If you don’t feel comfortable flying solo when choosing and setting up a home loan, it might be beneficial to have a professional explain the fine print to you. You may want to have a physical meeting or hands-on phone help to make sure you get home loan features that you can get the most out of.
- There is no access to branches
In-person customer service may be a priority for some owners – you might not be comfortable with certain technologies or have accessibility needs that are difficult to meet online. Others may just think that a more comprehensive service is provided in person and therefore prefer to have access to a branch.
At the end of the day, the rule of thumb is to do your research and compare all of your options.
You can start this journey online by using Mozo’s mortgage repayment calculator to see how a home loan might fit into your budget with different interest rates and time frames applied. Then see if the digital loan life is for you at our online lending center.