Israeli culture puts a lot of weight on owning your own house. Having a roof over your head is a dream for many young Israeli couples, who discover that making it come true, will force them to take a long and exhausting journey, especially for those who are no experts in the field of capital markets and the banking system. Assuming you already have enough money for the deposit, and after you have found the house you would like to buy, you are required to conduct your own survey of several banks, and make a request for a mortgage. This does not mean that you will receive the capital. You now have to present all the paperwork that shows you are able to pay the loan. Among the documents you have to show the bank are paychecks and the real estate purchase agreements, only then might you receive a general approval, and a few interest courses options. Then you can decide which one is best for you — not an easy process on its own, you will probably struggle comparing the different offers.
From the moment you receive the final agreement, the clock starts ticking and you get only 21 days to close the deal. That means getting an estimate, receiving offers for mortgage insurance, a notarized power of attorney, register in the land registry office, and signing numerous documents at your attorney’s office. During that process you’ll most likely visit your bank at least three times, and in the end – congratulations! You’ve got yourself a home.
Taking a mortgage is one of the most meaningful financial decisions a family can make. Does it have to be so complicated?
The risks and potential damage in taking a mortgage that does not fit your needs and abilities are big, but the savings can be even greater if you do everything right and take the required steps into consideration. Over the last month, over 8,000 households have taken a mortgage. Most of them had to visit three different banks and receive offers. After deciding on the mortgage plan, they have to visit the chosen bank 2-3 more times.
Imagine having the ability to request a mortgage in a number of banks in a digital way, without having to send any document. Being able to compare the different offers we receive in a simple search engine, and really understanding the differences between the offers. Imagine being able to make the best decision for yourselves.
And now let’s assume that processes such as registering in the land registry office, registering at the mortgages register, and signing other documents can be done online.
How does that sound? Research shows that a mortgage is a competitive product. The truth is that it can be much more competitive than it is now.
Can it be done? How?
The first phase of change is allowing the customers to receive a digital mortgage approval from the bank. The good news is that this is happening as we speak. Over six months ago, The Bank of Jerusalem launched a digital mortgage service that allows a general mortgage approval. Other banks have started offering this service too, and I believe that we are about two years away from having this service as a market standard.
The second phase is that instead of us having to send all of our documents to the bank in order to get its approval, banks should expose all of the information sources themselves, and verify our information (with our explicit consent). Customers will not have to send as many documents and the bank would not have to wait for it, and spend so much time analyzing it.
Our resources as consumers will be allocated to sending more requests to a variety of institutions, and the bank’s resources will be allocated to giving us a more meaningful consultation, with higher quality, that is tailored to our needs in every platform that’s comfortable to us – via a visit to the branch, via chat, a video call or any other platform.
The third phase regards transferring documents such as the purchase contract, land registry, mortgage registry, choosing an appraiser and evaluating the value of the property – all of these will be done digitally for the customer through an online interface of governmental bodies. It’s important to understand that this phase depends more on the Government Information and communications technology Authority whose role is to initiate these sorts of projects than on the banking system. This technological development will shorten the process significantly and save the customer a lot of running around and bureaucracy.
The fourth and last phase is allowing the customer to sign the mortgage documents wherever he chooses. It could be done physically at the branch, through a digital platform or even using a personal delivery. With this phase accomplished, one of the most important Consumer revolutions will be completed.
Regulators and banks all over the world had already realized this is the right way, thus it’s no wonder that big organizations around the world already allow taking a mortgage through digital platforms. In the U.S for example, the biggest mortgage lender is a company named ‘Quicken loans’ that gives mortgages online.
This important process will happen here as well, slowly but surely, we’ll get there.