FinTech: Divvy, Which Democratizes Home Ownership, Lands $200M
Divvy Homes quadrupled its valuation to $2 billion.
Property technology startup Divvy Homes, which helps people who don’t qualify for a mortgage to own homes, raised $200 million in a round co-led by existing investors Tiger Global Management and Caffeinated Capital. Andreessen Horowitz, Singapore’s GIC, GGV Capital, and Moore Specialty Credit also participated in the round. (Bloomberg)
How it works
A prospective homeowner who is unable to secure a mortgage and buy a home can apply to Divvy. On approval, they are given a budget to find a home. Divvy pays for the home in full including all fees, closing costs, taxes, and insurance. The buyer only makes a down payment of 1-2% of the cost.
The buyer then moves into the house and commences monthly payments to Divvy. About 25% of the monthly payment is earmarked as the buyers’ “savings” to be ultimately applied towards a down payment.
Divvy presets a price at which the customer can buy the home off it. The price doesn’t change even though the home may increase in value.
The method allows more people to be able to buy a home, even though their finances and credit record render them ineligible for a mortgage from the traditional financial system.
“We’re aiming to bring legitimacy to alternative home financing options,” Chief Executive Officer Adena Hefets said to Bloomberg.
Amidst bullish residential prices, Divvy’s product has proved very popular – the number of cumulative qualified applicants and acquisitions of homes per month has tripled since February, according to Hefets.
“Over the next 10 years, we believe Divvy Homes has the potential to help more than 100,000 families become financially responsible homeowners,” Scott Shleifer, a partner at Tiger Global, said in a statement emailed to Bloomberg.
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