Unmortgage raised £10 million – Business Insider

The Unmortgage team.
Unmortgage

• 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.