Fintech startup A Leg Up lets budding homeowners crack the market using ‘unemployed’ real estate equity

In Australia, the number one driver of wealth inequality is real estate and, in particular, not owning real estate.

As house prices around Australia continue to rise, purchasing a home feels further and further out of reach for most Australians.

To combat 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 deposit (eg, 5%) we help them purchase a property five years faster. For established homeowners, our novel product lets them earn a return on often inaccessible real estate equity without any cash outlay,” he says.

“Our platform is structured so that all our stakeholders win; aspiring homeowners, established homeowners, and banks. We’ve developed a novel mechanism to unlock Australia’s biggest source of investment capital – real estate.

“Our solution aggregates established homeowners who have equity in their property and diversifies them across a pool of aspiring homeowners who have qualified for a prime mortgage but have a low deposit.

“Typically, aspiring homeowners with a low deposit need to pay Lenders Mortgage Insurance (LMI) and are hit with a higher interest rate.”

Accessing Our Leg Up is as simple as checking a box when applying for a home loan and will save them thousands says Ragavan.

“Our solution is an attractive alternative, allowing an Aussie who buys a $600,000 property with a 5% deposit to save over $10,000 on LMI and higher interest rates. We don’t demand a stake in your property or charge more 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 lodge an application.”

Given that we are creating a novel investment product, Ragavan said there were several milestones to hit in bringing the product to market.

“We’ve made sure our product will protect established homeowners even in a crisis akin to a US GFC by ensuring the risk mitigation mechanisms, product structure and legal documentation all line up. We spent a lot of time reviewing academic research and building economic models for Australia’s unique mortgage market, delinquencies and foreclosures,” says Ragavan.

“We have been working with banks and legal counsel to ensure the structure satisfies APRA’s requirements and is a product our partner banks can offer.”

Ragavan has been backed by early-stage VC Antler, which has been a huge help in launching the business.

“I’ve majorly benefitted from their program,” Ragavan says.

“During the program, I worked with Anthony Millet, who is an experienced innovator in the field and deeply understood the opportunity. We also had a bunch of inbound interest from investors post demo day and have now filled over half of our capital raise.”

Going forward, Ragavan hopes Our Leg Up will help thousands of Australians purchase a property faster and reduce wealth inequality.

“Right now, we’re starting with a product that helps first home buyers purchase a home faster, but we plan to leverage the same novel investment mechanism to offer more products that have a positive impact on society,” he says.

• Startup Daily is the official media partner of Antler in Australia.