Touted as “Afterpay for home loans”, a new non-bank lender is looking to improve the ability of home owners to buy before they’ve sold their own property.
Aaron Bassin, former head of strategy at ASX-listed lender MoneyMe, and Nick Jacobs, director of Sydney-based brokerage MortgageWorks, have founded fintech lender TechLend.
The duo came together after reporting frustrations with the limits of traditional home loans.
They noted that many borrowers were moving between houses and experiencing difficult and expensive situations, such as needing to sell a home and rent in the interim before buying and moving again (or, for some, to take on two mortgages).
The first product available from TechLend is therefore a bridging loan, marketed as giving home owners quick finance when they are looking to buy a new property.
The offering, which could see customers access between $250,000 and $3 million for up to six months, is interest-free for the first 90 days, with a set-up cost from 1.99 per cent for the initial three-month term.
After the interest-free period, interest is added to the loan balance until the loan is repaid (with interest capitalised).
TechLend offers a loan-to-value ratio (LVR) of up to 75 per cent for residential properties, 60 per cent for commercial properties, and 50 per cent for vacant land.
It also uses data around property and values as well as from open banking and comprehensive credit reporting to deliver same-day pre-approvals and financing within 48 hours.
Technology and data analysis has been fundamental to allowing quick approval times, Aaron Bassin, co-founder and chief executive of TechLend, told REB’s sister brand, The Adviser, but he expects the product will also disrupt the current status quo for bridging loans.
Traditional lenders have been averse to bridging loans, the CEO noted, suggesting this was a result of their short durations and the relatively significant costs that are incurred in their origination.
The bias against the product has extended to brokers, because the banks tend to have policies to claw back commissions if loans are repaid within 12 months, he added.
“So, the scenario is, you’re a borrower, you go to the mortgage broker, you get a loan and you repay it through the bridging period. In a few months, that broker won’t get paid for their work,” Mr Bassin told The Adviser.
“The brokers aren’t incentivised to really help their clients with bridging, and the banks aren’t incentivised to do it because the cost involved is prohibitive for them to originate a loan only for a few months. And so, that’s why the system is broken.”
Director Nick Jacobs echoed his co-founder, commenting that consumers had been limited by rigid and slow lending options.
“As a mortgage broker, I understand the frustration that comes with traditional lending solutions and the obstacles that many of my clients face when it comes to sourcing funding,” he said.
“TechLend provided a pathway to the great Australian dream with same-day turnaround and greater accessibility in a market that is in desperate need of innovation and disruption.”
TechLend is planning to engage with brokers, with plans to distribute through brokers and its own direct digital channel.
The company is marketing the offering as a win-win solution where brokers can “still get paid” while helping their clients.
Mr Bassin also commented that there is a significant opportunity to be captured — especially with people increasingly moving to regional areas and looking to work remotely.
“In the next five years, just in downsizing, there’s 1.6 million households planning to downsize, and they don’t have a solution that is available to them,” he said.
“And so downsizing, relocating and maximising property values is the market that we’re after. And we want to be the first movers and capture that segment where COVID has presented an opportunity for us — you’re working from home, this age of digital disruption.”
Mr Bassin has significant goals laid out for the group, after leading MoneyMe to its ASX listing. Ultimately, he has envisioned TechLend becoming a bank and a unicorn, a start-up valued at more than $1 billion.
“Given my background of being at MoneyMe previously, and my co-founder’s experience in the mortgage industry, and our passion to help provide Australians with a good solution for property finance, I’ve got huge ambitions for this business,” he said.
“And while we’re starting in just bridging loans, our ambitions are beyond current products. We aim to be a full-service bank.”