Unmortgage
The Unmortgage team.
- British startup Unmortgage has raised a massive £10 million ($13 million) seed round to help people part-buy, part-rent their homes.
- The idea is that people buy a percentage of their dream house that they can afford, and Unmortgage buys up the rest and acts as a landlord.
- The startup will launch in January 2019 and will initially focus on areas outside London.
Second to the weather, the British like to grumble about property prices.
The national obsession with home ownership is good news for Unmortgage, a 12-person London-based property technology startup that has raised a massive £10 million pre-launch seed round to help people onto the property ladder.
Investors include Augmentum Fintech and Anthemis Exponential Ventures.
The idea is that buyers find their dream house, pay for at least 5% of it in cash, and then Unmortgage buys the rest, also in cash. Buyers pay rent on the portion they don't own, and can buy out Unmortgage or sell their stake when they want to move on.
The appeal is that Unmortgage can help buyers into a house worth up to ten times their salary.
It's perhaps most similar to shared ownership, says chief executive Ray Rafiq-Omar, but is more flexible.
"The premise is that if people can afford to pay rent, they should be able to afford to own," he told Business Insider. "They can buy as little as 5% and pay rent on the rest."
Unmortgage isn't like an online estate agent, with properties on its books. Instead, the prospective buyer uses Unmortgage's calculator to work out what they could afford, finds a property through a conventional estate agent or a site like Rightmove, then passes the details of that property onto Unmortgage.
The startup then takes over negotiations, and conducts the conveyancing and survey. The buyer then signs two agreements: A partnership agreement, and a tenancy agreement.
A customer's annual rent is tied to inflation, Rafiq-Omar added, though buyers are free to challenge that in a sluggish market. Initial rent, he said, was "market rate."
The idea is that buyers can access properties that they would conventionally only be able to rent, not buy. That means Unmortgage is only targeted higher end properties. Where does it find the money?
The startup says it has backing from institutions such as pension funds and insurance firms, which are attracted by the idea of long-term returns. According to Rafiq-Omar, pension funds have conventionally chosen not to invest in residential property, leaving a gap in the market for a company like Unmortgage.
For buyers, some aspects of Unmortgage fly in the face of traditional financial advice. Namely, not overstretching yourself by putting your savings into a deposit, then continuing to cough up rent you may not be able to afford. Rafiq-Omar said buyers should seek independent financial advice about their options. And as with renting, there is always the risk of what happens if you're suddenly unable to pay.
Rafiq-Omar said the startup would "look to be pastoral" about a customer's circumstances.
"[We would] speak to our customer to see if this is temporary, and if so we can work out a payment plan for arrears once they're back on their feet."
For anyone likely to struggle with rent long-term, he added, Unmortgage would likely buy the person out. And in the case of "bad leavers", Unmortgage would go through repossession proceedings.
The company plans to launch in early 2019, and is aiming for a headcount of 40 by the end of this year. It will initially focus outside London.