In Australia, real estate is the leading cause of wealth inequality, and in particular the lack of property ownership.
As house prices in Australia continue to rise, buying a home feels increasingly out of reach for most Australians.
To counter this, former mortgage broker and investment banker Michael Ragavan is creating a new solution, Our Leg Up, to help aspiring homeowners while also benefiting established homeowners who have built up large amounts of equity in their property.
“For aspiring homeowners with a low down payment (eg 5%), we help them buy a home five years faster. For established homeowners, our new product will allow them to earn a return on often inaccessible real estate assets without any out-of-pocket expenses,” he says.
“Our platform is structured in such a way that all our stakeholders win; aspiring homeowners, established homeowners and banks. We’ve developed a new mechanism to unlock Australia’s largest source of investment capital: real estate.
“Our solution gathers established homeowners who have equity in their property and diversifies them across a pool of aspiring homeowners who qualify for a prime mortgage but have low down payments.
“Normally, aspiring homeowners with low down payments have to pay Lenders Mortgage Insurance (LMI) and are hit with a higher interest rate.”
Getting access to Our Leg Up is as easy as checking a box when applying for a home loan and saving them thousands, Ragavan says.
“Our solution is an attractive alternative, allowing an Aussie buying a $600,000 property with a 5% down payment to save more than $10,000 on LMI and higher interest rates. We don’t charge an interest in your property or charge a higher cost for the convenience of owning a home; in fact, we make sure you pay less,” he says.
“Our product will be available through mortgage brokers and it’s essentially another tick box instead of LMI when they apply.”
As we are creating a new investment product, Ragavan said there were several milestones to bring the product to market.
“We’ve made sure that our product will protect established homeowners, even in a crisis akin to a US GFC, by ensuring that mitigation mechanisms, product structure and legal documentation are all aligned. We’ve spent a lot of time reviewing academic research and building economic models for Australia’s unique mortgage market, delinquency and bankruptcy,” said Ragavan.
“We’ve worked with banks and legal advisors to ensure the structure meets APRA’s requirements and is a product that our partner banks can offer.”
Ragavan is supported by VC. in an early stage antlerswhich has been a huge help in starting the business.
“I have benefited immensely from their program,” Ragavan says.
“During the program I worked with Anthony Millet, who is an experienced innovator in the field and understood the opportunity very well. We also had a lot of inbound investor interest after the demo day and have now filled more than half of our capital raise.”
In the future, Ragavan hopes Our Leg Up will help thousands of Australians buy homes faster and reduce wealth inequality.
“Right now, we’re starting with a product that will help first-time homebuyers buy a home faster, but we plan to use the same new investment mechanism to offer more products that have a positive impact on society,” he says.
- Startup Daily is Antler’s official media partner in Australia.