The future is here, at least when it comes to mortgages going digital. Gone are the days where you walked into a bank, signed a document swearing to your annual income, and someone stamped ‘APPROVED’ on a manila file folder with your name on it. Now, the process begins with taps, swipes, and clicks, whether you’re looking at mortgage apps or using mortgage calculators. According to a 2016 mortgage consumer survey, 72 per cent of mortgage consumers looked to various online sources to find out about mortgage options and features.
Some banks and mortgage brokerages have developed apps where you can answer a few simple questions and be pre-qualified for a mortgage, or even take the process a step further and submit documents to a lender for review. In a world where we all crave convenience, is there a downside to automating one of the biggest purchases that you will ever make?
“You see it already – everything is going to be very much electronic,” said Ann Brill, principal broker and owner of CENTUM Metrocapp Wealth Solutions Inc., which created the “15-minute Mortgage” prequalifying tool. “I know people in the industry who almost don’t meet any clients. And to me, that’s a disservice to myself and to the client. When you talk to someone face-to-face, there’s certain things that you can pick up that you don’t see over the phone.”
Therein lies one of the key functions of a broker, or any mortgage professional worth their salt: they’re able to align your long-term financial goals with the kind of mortgage that you get, something that may or may not be clear to borrowers, especially first-time home buyers with no in-depth knowledge of the different mortgage products offered by different lenders.
Banks are the traditional lenders, and even they’re dealing with demand to go digital – from both consumers and brokers. When it comes to submitting documentation, mortgage brokers want more options when it comes to being able to send material to the lenders quickly and easily. A recent survey of mortgage brokers across Canada revealed that brokers wanted to see more lenders step up when it comes to things like online portals for submitting documents, electronic signatures, or ways to check up on the application to determine how far along it is in the process.
Paul Meredith, a mortgage broker at CityCan Financial Corporation, agrees that that the majority of mortgage business is going to be online, but “there’s never going to be any substitute for that personal contact and for a brokerage to provide the right information and the right advice,” he says. “There are do-it-yourself websites out there, but I find that with those, that’s going to remove the personal touch that a broker can offer, and it can lead to problems down the road for people because if they’re just choosing their own product, there’s no one out there to analyze their personal situation and take their personal goals and what their best interests are into consideration. Because a lot of people don’t know what’s in their best interests. They think that they want a 5-year fixed, or they think that they want a variable, but there may be other options available to them which wouldn’t end up being presented if they were doing everything 100% by themselves.”
13 per cent of home buyers pre-qualified for a mortgage online, 10 per cent applied for a mortgage online, and 8 per cent found a mortgage lender online, according to a 2016 report on home buyer and seller generational trends.
“The lack of face-to-face communication I don’t foresee being any major issue here in the industry, most people that are fine with it,” Meredith says. “There are many clients that I deal with that I don’t even end up talking to on the phone, it’s all done by email. I find that there’s a very small group of people that want to have at least one meeting face-to-face, and for those people most brokers, I think, will still offer that to their clients, for those who really want it.”
The amount of information available on the internet has made it possible for people to do a lot of their own research when it comes to securing a mortgage, but broker Geoff Lee cautions that just because it’s on the internet doesn’t mean it’s true – and first-time buyers especially may need help sorting the wheat from the chaff, something that may be missed when circumventing the step of consulting with a mortgage professional
“There’s so much miseducation out there,” Lee says. “A lot of times people will come to us thinking they’ve done their homework and they’re telling you, ‘This is what I read,’ or assuming what they read is true and you have to realign them because there’s a lot of education out there, but it’s not always what’s applicable to them in their current situation. Sometimes it is a struggle because people come to the table thinking that they know everything or they’re coming to the table reconfirming what they want to hear.”
Lee notes that his brokerage receives many initial inquiries through their website, and most of the mortgages obtained were done without face-to-face communication.
Unlike some brokers, however, Brill insists on meeting almost all of her clients in order to advise them the best way possible.
“I truly believe our industry is all about relationships – the technology truly to a large extent takes that away from building those strong relationships. I still makes it mandatory to meet most of clients – 99.9 per cent of my clients at one point. A lot of times the initial application stage is done electronically. The problem with that is, you miss that real sense of what they’re trying to achieve.”
Buyers may be tempted to get a mortgage in the fastest, easiest way possible, and forego meeting with a mortgage specialist altogether. CIBC’s mortgage app, Hello Home, advertises being able to complete your mortgage application from start to finish, and gives you the option of messaging a mortgage specialist throughout the process. In this way, technology provides the mortgage industry with a way to keep up with today’s consumer culture, streamline the process of getting a mortgage, and help consumers access information to educate themselves about various mortgage products available in the marketplace. But if buyers aren’t careful and don’t know what questions to ask, things can fall through the cracks, such as discussions of pre-payment penalties and the fine print detailing the limitations of the mortgage agreement.
Sheri Creese was in banking for 25 years before becoming a mortgage broker, and thinks that the majority of home buyers will still use brokers as opposed to a more do-it-yourself method supported by apps.
“People still want someone that they can reach out to and get great advice, and be able to reach out and telephone or reach face to face, particularly when they’re making such an important purchase or decision,” Creese says. “So will there be a certain segment of the population that will gravitate to that? Sure there will. The same way as there’s a certain segment who gravitate to PC [Financial] or ING in its day (Tangerine now), but it certainly hasn’t taken over, and I think that the same will hold true in this case, that people are looking to talk to someone and have great service and get great advice.”
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