“Unmortgage enables everyone to live in the home they want to, that’s our mission,” Unmortgage co-founder and CEO Ray Rafiq-Omar tells me. “We do that by allowing people to buy as little as five percent of a home and rent the rest. So there’s no mortgage involved, hence the name Unmortgage”.
The burgeoning London startup, which aims to launch next year having just closed a hefty £10 million seed round, calls its model “part-own, part-rent”. However, unlike traditional shared ownership schemes, Unmortgage doesn’t want you to have to take out a mortgage to buy the first portion of your own, and it isn’t targeting new-builds.
Like a number of other fintech companies, it is the latest attempt to solve the increasing difficulty first time buyers face trying to get on the housing ladder as rising house prices typically outstrip wages. If people rent, they often cannot save the large deposit required for a mortgage. It is this “vicious circle” that Unmortgage want to break: by helping families that can afford to rent gradually buy a home.
“The way we like to think about it is the security of home ownership with the flexibility of renting,” says Rafiq-Omar. “You find a home. If we like it too, we’ll but 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 from as little as a pound at any time”.
To keeps things fair — Rafiq-Omar stresses that fairness is “our core value” — Unmortgage will revalue the property on a monthly basis so you’ll always have an up-to-date valuation when increasing your stake. And at any point you are free to either buy out Unmortgage with a mortgage or an inheritance or to give the company three month’s notice for it to buy you out so you can take your cash at market price and move on to your next home.
Likewise, the rent you pay on the part of the property you don’t own is pegged to rises to inflation. But in case inflation outpaces market rate rents, Rafiq-Omar says Unmortgage will allow the customer to ask for a rent review. “They have the ability to not have to worry about their rent but if they are worried they can have it reviewed,” he says.
Unmortgage will use institutional funding to finance its part of the homes it purchases, who Rafiq-Omar says would like to own residential property, and the secure income stream it brings, but don’t want to be landlords or end up in the media for behaving like a landlord. “Unmortgage gives them a way to invest in residential property while solving societal need, which is [that] people want to own their own homes and have security over their housing situation”.
Meanwhile, investors in Unmortgage’s seed round are fintech venture capital firms Anthemis Exponential Ventures, and Augmentum Fintech plc. “”We’re grateful to our investors for believing in us and our social mission and excited to be working with them – especially Tee Pruitt [of Anthemis], who was instrumental through much of this process,” adds Rafiq-Omar.
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