This is How Smart Contracts Will Transform the Mortgage Industry
Smart contracts have been a hot topic as of late. With cryptocurrencies popularity increasing at an exponential rate, it’s no surprise that everyone is talking about them.
Typically, when people think of smart contracts, most automatically think of traditional tokens on the Ethereum or Solana networks, but what if there were other use cases; use cases that will disrupt industries not directly related to cryptocurrency and blockchain technology? Well, there is and I’ll get to that in a second, but first, for the people who are not too familiar with smart contracts, I’ll get you up to speed.
What are Smart Contracts?
For those who don’t know, smart contracts are self-executing agreements with the terms and conditions of the underlying agreement written into code. These contracts are stored and replicated on a blockchain network and can be automatically executed when certain conditions are met.
Think of it this way. When you apply for a mortgage or a rental, either the bank or landlord typically requires proof of assets, income, and the disclosure of debts. Once approved, a lease or mortgage (contract) is created between the two parties (renter or homeowner; landlord or bank) that binds both parties to the obligations set forth. If there are problems, a third party steps in to resolve the contractual dispute. This can get messy for various reasons that I won’t get into, but I’m sure you can use your imagination.
Why are Smart Contracts so Groundbreaking?
With smart contracts, there is no need for a third party to validate finances. There’s no need for an intermediary to resolve disputes. All agreements, disputes and most importantly, data is easily validated through the blockchain.
How Will This Revolutionize the Mortgage Industry?
This is the easy part. For those who have applied for a mortgage, you can agree; it’s time consuming and consists of a lot of tedious paperwork. For those who have not, everything has to be validated and confirmed before you receive approval. Your employment history, income, assets, liabilities, etc. all need to be verified.
You see what I did there? Yep, the word “validated.”
With smart contracts, there’s no need to submit mountains of paperwork to a bank. There’s no need to “prove” your finances. Why? Because that information will be recorded directly on a blockchain and verified instantly. Yes yes, I know. You may be thinking to yourself “well, what about privacy?” Don’t worry, there will be safeguards in place. Your data won’t be visible for the entire world to see.
Thinking Ahead
Let me paint a picture. Imagine a world where you want to purchase a home, but instead of calling a bank and going through the entire mortgage approval process, you simply hop online, punch a few keys and bam! You’re approved instantly. The money from your loan sits in an escrow account protected by encryption, then when a separate smart contract confirms the transaction took place and you have ownership of the property, the funds are released from escrow and everyone goes about their lives. No more waiting, no more mounds of paperwork, no more hassle, and most importantly, no more spending thousands on fees.
