Digital lender StrideUp targets first-time buyers with the launch of a condominium mortgage product that offers loans up to six and a half times the income.
Customers will need a 10% down payment to partner with the company and then make a single monthly payment to cover repayments and rent, effectively borrowing six and a half times their income. The company says most other lenders limit lending in this market to four and a half times income.
Homeowners can buy up to 80% of their new home, including the deposit, and rent out the rest, until they’re ready to buy more, in increments they choose, the digital lender says.
The company adds that the value of the remaining 20% is frozen at the purchase price, allowing customers to buy the rest at the same price even if house prices rise. However, any loss due to property prices falls on the remaining 20% and is shared with the company.
The digital platform says its product can help replace the government’s equity loan purchase assistance scheme, which closes new applications on October 31. He adds that his proceeds can be used to buy older properties, while the government loan program is limited to new construction.
The move comes after StrideUp reached a funding deal of up to £280m with European real estate debt investment manager ARA Venn, which the platform says will help tackle “the crisis of FTB accessibility in the UK”.
Average FTB deposits are £53,935, while affordability has fallen in all but three UK local authority areas over the past decade, according to the Halifax FTB Review 2021.
StrideUp Co-Founder and Managing Director, Sakeeb Zaman, says, “With soaring house prices and constraints on traditional mortgages, deposits are often insufficient, and at the same time people are spending more on rent and living expenses. With this new funding agreement, StrideUp is uniquely positioned to offer a real alternative.
Gary McKenzie-Smith, Managing Partner of ARA Venn, adds, “Help to Buy has made a major contribution to the FTB market, but it’s ending and the StrideUp plan is a much less restrictive and more flexible true replacement for buyers.”