INSUBCONTINENT EXCLUSIVE:
Proportunity, a London-based startup and Entrepreneur First alumni, wants to help first time buyers get on the property ladder earlier or
purchase a home more to their liking.The company, which recently became an FCA authorised mortgage lender, claims to use machine learning to
accurately forecast future house prices and the areas of London that will see the highest growth in the next few years
Based on confidence in this modelling, it will soon begin offering equity loans to boost your deposit when buying a first home.Specifically,
once Proportunity has used its technology to help identify a property for sale that both fits your needs and offers good house price growth
prospects, the startup will offer an equity loan of up to 15 percent of the property price
You then combine this loan with the money you have already saved for a deposit so that you can apply for a mortgage with a lower
loan-to-value ratio, which in turn will command a lower interest rate.The way it works is quite similar to the U.K
government &Help To Buy& scheme, except it isn&t restricted to a new build and you have to pay monthly interest on the loan from the get-go
Like Help To Buy, when you sell the house or remortgage it in five years time, you have to repay the Proportunity equity loan at 15 percent
of the current market price
Therefore, if the price of the house has gone up, the amount you pay back will have also increased
In the unlikelihood that the price has gone down, the startup loses money.Overall, however, since a Proportunity loan is interest-only until
you pay it back after five years, the company says the combined monthly repayments are less than if you took out a 95 percent mortgage to
And unlike shared ownership schemes, you don&t have to pay rent on the 15 percent of your home funded by a Proportunity loan.More broadly
Proportunity is attempting to solve a very London-centric problem: house prices are so high and continue to rise that by the time you save
up for a 20 percent deposit to secure a mortgage you can afford, property prices in the area you want to buy will have increased enough to
put it out of reach again
Or you&ll be left buying a smaller property.&One of the biggest societal challenges we face is getting the next generation onto the housing
ladder,& explains CEO Vadim Toader, who founded Proportunity with CTO Stefan Boronea
&The biggest reason this is hard is that it increasingly difficult to save up for a deposit, even for buyers with qualifying salaries
But what if we could use technology to give people a leg up onto the housing ladder It all starts with forecasting&.To put its
machine-learning house price forecasting to the test, in July last year Proportunity worked with Post Office Money to help first time buyers
identify the best areas to buy, not just in terms of affordability but also in terms of future growth
&This was insightful, as we learned that there are 200,000 fewer first time buyers per year than there used to be, and 70 percent cite
deposits as their biggest issue
If we can help these people find deposits, we can reverse the tide&.That, of course, is where the U.K
government own scheme is meant to kick in
However, Help To Buy can only support around 40,000 first time buyers, says Toader, partly because it has a limited budget and partly
because it only addresses new properties.&The interesting thing is that many of those left out have two great characteristics,& he says
&First they have a good income and excellent prospects, and secondly they want to buy in an area where we project property prices will grow
The simple issue is they can not afford a 20 percent deposit
We believe our technology can help&.To that end, Proportunity has secured £5 million in credit to begin making equity loans
The startup itself — which is part of EF cohort 7 — has raised £2.7 million in funding to bring its equity loans to market and further
develop its price forecasting technology.Backers include Global Founders Capital, Concrete VC (backed by Starwood Capital Group), Savills,
EF, Trusted Insights, and Le Studio VC, along with angel investors Matt Robinson (Nested), Chris Mairs (EF) , Charlie Songhurst, Nicolas
Berggruen, and Julian Critchlow.Lastly, I&m told that half of the Proportunity team, including Toader himself, is taking out a Proportunity
&We&re going through the process ourselves, sitting in the customer shoes to better understand it and fix it before releasing it to them
[I] guess it also shows we&re eating our own dog food&.
