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    Better.com, the Fast-Growing Online Mortgage Lender, Is Going Public

    Kevin Roche — Analyst

    Kevin Roche — Analyst

    May 13, 2021

    better.com

    May 13, 2021

    Some online mortgage lenders are great, but some are even ‘Better’. On May 11, Better.com – an online mortgage lender – announced a deal to go public via SPAC at a valuation of ~$7b.

    A child of the PropTech disruption

    Online mortgage lenders, drone footage of properties, home purchasing from virtual tours alone – these are the effects of the PropTech (“Property Technology”) revolution that is digitizing the real estate sector.

    Tech has been infiltrating the home purchasing process on several levels:

    1. Home buying – Zillow ($Z) offers a marketplace to find your next home.
    2. Mortgage applicationBetter.com ($AURC) offers tools for finding mortgages, home/title insurances, and other necessary purchases.
    3. Home sellingiBuying companies, like OpenDoor ($OPEN), make all-cash offers in a matter of days on the direct purchases of homes.

    With city folks flocking to the suburbs and mortgage refinancing surging from low-interest rates, the demand for mortgages by Better has never been higher. The numbers for loan volume:

    • In 2020 – $24b, up 500% from 2019 and expected to double again this year.
    • In 2021 – $14b in the 1st quarter alone.

    Building on the mortgage boom

    By moving the entire mortgage application online and removing agent commissions, Better is able to offer lower fees while reducing the house closing process time by half.

    The “100% online” and low-cost feature made Better.com one of the more attractive options in the last year – and the company’s 2020 financials have exploded as a result:

    • $875m in sales – up 884% from 2019.
    • $227m in net income – up from a loss of $66m in 2019.

    Better.com will join the following online mortgage lenders to have also recently gone public:

    • Rocket Companies ($RKT), which got the WallStreetBets treatment in March, went public via IPO in Aug. 2020.
    • United Wholesale Mortgage ($UWMC) went public via the biggest SPAC deal at the time in Jan. 2021.

    For investors… Do you trust Better’s foundation?

    The combination of many working from home and the near-zero interest rates this past year set the housing market on fire. Interest rates aren’t expected to rise until 2023, but the mortgage boom is showing signs of fading.

    Mortgage lenders are forever tied to the state of the housing market – and Better’s rivals are expecting declining profits in the second quarter of this year as things cool.

    Potential investors should make sure they feel at home with Better while it builds up its market share.

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