Home loans take months, how does this bank do 7-day approvals?

Posted: 8 June 2021 2:13 pm
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Neobank 86 400 now offers swift turnaround times on home loans direct to borrowers, with approval in 48 hours and loan settlement in just 7 days.

This is in stark contrast to the broader banking industry right now, which is seeing many lenders struggle with long turnaround times that have borrowers waiting weeks or even months for home loan approval.

Melissa Christy, 86 400 Lending Product Lead, said the average turnaround time for its borrowers right now is no more than 48 hours from the time the application is submitted to getting an answer.

"We're currently picking up all applications within 24 hours of submission. If the application is complete, meaning the applicant has provided all the required information we've asked for, then we can approve it on the same day, or latest by the following day," Christy told Finder.

Previously, 86 400 only offered loans through mortgage brokers, meaning consumers were only able to apply for their home loans through a broker.

"Now, the way that the direct-to-consumer process works is that we get verified data upfront from applicants as they go through the application process, rather than relying on manual payslips and statements that need to get verified after submission," Christy explained.

"This means that the post-submission process is significantly faster, enabling us to provide these swift turnaround times."

Once approved, a borrower's loan can settle within just seven days. This defies the industry trend, where lenders are struggling to keep up with surging demand for home loans. Adding stress is the fact that many don't have enough trained staff to deal with the volume of enquiries and that part of their workforce is based in India, which is currently in the midst of another crippling pandemic wave.

As a result, some banks are taking weeks to even pick up a file, let alone process, approve and settle the loan.

Shaun Murphy

For 45-year-old events sales director Shaun Murphy, it was the potential interest savings that first intrigued him. Based in Central Coast in NSW, Shaun was previously with a Big Four bank, paying an interest rate of 2.35% for a loan worth $440,000.

"It had an offset account – which is an important feature for me – and repayments of $498 per week. By moving to 86 400 on a variable interest rate, my repayments dropped to $486 per week, with no extra fees. This meant I was saving $728 p.a. straight away," Shaun told Finder.

"However, as of the end of May, I've taken advantage of its fantastic fixed rate option of 1.98%. I've split my loan with $200k in fixed and $240k as variable. This brought my repayments down even further to just $423 per week. With this change, I stand to save another $3,100 p.a."

Shaun said the process of applying was simple, with "no hidden fees, and all the hard work taken out of my hands."

"To be honest, at first, I was a little daunted by the expenditure data scraping as it really makes people aware of their spending. But overall, the process was simple, informative and completely customer driven – I loved the online application process and the customer service was outstanding," he said.

"I had a glass of wine to prepare myself because it usually takes so long [to apply for finance]. But it only took about 20 minutes to go through the whole application. The next morning, I uploaded three forms of ID and had a call from Matthew in their customer service team. The loan was confirmed the following day, and settled within seven days."

The key to this one-week settlement is 86 400's "entirely digital" and automated process, said Christy.

"Most lenders in the market have a manual process, or the customer has the option of choosing between a manual or more digitised process. With us, our process is entirely digital," she said.

"All applications go through electronic ID, digital VOI, and provide all income and expenses from their financial institutions electronically. We start by using their actual real expenses over a three-month period and look at the actual net income that has hit their account over the past 12 months. Having all of this in place means we don't need to check whether their 'declared' information is correct."

Christy added that a move towards "instant home loan approval" is the future of mortgage lending.

"This is where we would like to be in the not too distant future," she said. "For refinances, it is easy to see how this could be a possibility given the applicants are already paying the debt off to date."

Check out home loans from 86 400, or compare the latest home loan deals from a wide range of lenders.

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