Only one in three millennials—those born between the early 80s and mid-90s— are a home owner in the United States, as rising home prices, increasing mortgage rates and the lack of starter homes have delayed this milestone for many young adults. Similarly, home ownership has plummeted amongst young families all throughout the United Kingdom. In 1984, 54, 50 and 53 percent of young families owned homes in south Yorkshire, Wales and outer London, respectively. In 2018, those rates dropped to 25, 28, and 16 percent.
Unmortgage, a London-based housing startup, is aiming to change that narrative and put home ownership within reach.
“Many people are forced to rent because they have no route to home ownership and little help to get that first foot on the ladder,” Josef Wasinski, co-founder and CEO of Unmortgage, said in Property Wire.
Through its “part own, part rent” gradual home ownership model, Unmortgage customers can gradually pay off a mortgage without having to deal with the hassle of applying for a loan and saving up a massive down payment.
“Unmortgage enables everyone to live in the home they want to; that’s our mission,” said Ray Rafiq-Omar, co-founder of the company in September 2018.
Customers only need a five percent down payment and a yearly household income of £30,000 to be eligible for an Unmortgage home. People who have poor credit scores, have consistently failed to pay rent or have ever gone bankrupt are not eligible for the Unmortgage platform.
The company then sets the user up with a “funding partner” who will buy the rest of the selected home if the property is deemed suitable for purchase. Unmortgage matches customers and funding partners with homes that both will like, and the tenants move in and make the place their own. As long as the customers are playing their rent, they can’t be asked to leave. The company will also take care of matters such as following up with solicitors and analysing property surveys.
Rent is determined by looking at similar homes in the area and deducting the initial payment. Every year, tenants can buy a greater percentage of their homes, up to 5 percent a year, by either increasing the rent or making a one-off payment.
“The way we like to think about it is the security of home ownership with the flexibility of renting,” Ray explained “You find a home. If we like it, too, we’ll buy it together in partnership. You’ll own your bit and you’ll pay rent on our bit. Then, you have the option to buy more of your home [for] as little as a pound at any time.”
Unlike a traditional shared ownership scheme, customers can buy more of the property whenever they want are not limited to new build properties.
Over time, tenants are expected to eventually buy out Unmortgage with a mortgage or inheritance. They will also have the option to give the startup three month’s notice for it to buy them out, allowing the customers to take their cash at market price and move on to another home.
The company makes money through fees from its funding partners. Unmortgage provides investment partners with access to long-term, low-volatile investments without the hassle of being a landlord to several homes or having to find enough properties to make the investments worthwhile. Through the platform, Unmortgage can offer its partners investments in residential homes on a large scale and find tenants for the properties.
Allianz Global Investors (AllianzGI) has partnered with the company to establish a £500 million fund to be used to purchase properties once the Unmortgage platform launches later this year.