Digital mortgage lender Better announced on Monday that the company is making its first overseas expansion with the acquisition of Trussle, a UK-based digital mortgage and insurance broker backed by Goldman Sachs and Finch Capital, among others.
The deal values Trussle at roughly $ 9 million, according to people familiar with the matter.
“Better and Trussle were founded on the understanding that consumers increasingly prefer to use online services to purchase and conduct important transactions,” Trussle CEO Ian Larkin said in a press release announcing the agreement.
Trussle was founded in 2015.
“We are very excited to be a part of Better, and we are confident that Trussle’s future looks brighter than ever as part of a large and growing international organization that shares our commitment to making homeownership simpler, more fair. and accessible to everyone, ”Larkin said. in the statement.
Amid a pandemic-induced US mortgage refinancing frenzy, Better made nearly $ 25 billion in loans last year.
Better was started in 2016 by Vishal Garg, a former Morgan Stanley analyst, after a deal to buy a home for his family fell through. A cash buyer was able to beat his traditional mortgage lender, and that’s when Garg thought there had to be a better way. You used the down payment you reserved to get started Better.
Goldman Sachs is among the existing investors in Better.
“It better eliminates the high financing costs, massive transaction friction, tyranny and overwhelming bureaucracy that comes with obtaining a mortgage and buying a UK home through a major bank,” Garg said in the settlement announcement. “We found a like-minded spirit in the Trussle team who have developed a platform that we can work with to help every Briton have their own home.”
The UK’s national homeownership rate had fallen from an all-time high of 70.9% in 2003 to 63.9% in 2018, according to the Brookings Institution.
Better’s platform moves the mortgage process completely online, giving clients the ability to upload and sign documents electronically, and claims to reduce closing time from an industry average of 42 days to 21 days. Garg says the digital-only approach is also helping to decrease bias against minorities when applying for home loans. The company has previously cited a study from the National Bureau of Economic Research showing that face-to-face lenders reject minority applicants about 6% more often than comparable minority applicants, and also charge more to applicants for minorities for their mortgages.
In addition, the company not only generated $ 800 million in revenue last year, but also profit, although its growth has not been without controversy.
In May, Better announced its plans for a market debut by merging with Aurora Acquisition Corp., valuing the company, which ranked 15th on last year’s CNBC Disruptor 50 list, at $ 7.7 billion. The SPAC deal includes a $ 1.5 billion private investment in a Public Equity Agreement (PIPE) led by SoftBank, which invested $ 500 million in the company just one month prior to the announcement of the deal. PIPEs are mechanisms for companies to raise capital from a select group of investors that make final market debut possible.
The transaction is expected to close in the fourth quarter.
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