Lower goes higher with $100M Series A round to simplify home buying

The news: US-based alt lender Lower raised a $100 million Series A funding round, led by Accel, per TechCrunch.

What does it do? Lower aims to simplify the homebuying process for consumers, assisting users with saving for a home and obtaining or refinancing a mortgage. Through its network of 35 partners—including Liberty Mutual, Chubb, and Progressive—users can also get insurance.

What appealed to investors? Lower is profitable—an uncommon trait among fintechs—and has added new services to boost its operations over the last years

  • Lower has funded billions of dollars in loans. After doubling its revenue yearly, it reached $300 million in revenue in 2020. The Series A round marks its first external round of funding in its seven years of operations. As a previously bootstrapped company, Lower’s historic independence likely increased investors’ confidence.
  • Lower launched a website to host its savings and lending services in 2018. This year, it added a mobile app with a savings account to its product suite. The savings account, HomeFund, is FDIC insured and offers a 0.75% APY. Lower also offers a “dollar-for-dollar match in rewards” for the first $1,000 saved. This attractive savings offering appeals to its largely youthful client base, enabling Lower to lure in users early on and upsell them to mortgages later.

What’s the strategy? The fintech is developing greater independence within its native servicing platform and has set its sights on an eventual IPO.

  • Although Lower services the majority of its loans, it also uses a subservicer to perform all of the administrative, compliance, and financial servicing activities for a mortgage loan. Lower plans to launch its own native servicing platform in early 2022, which will raise revenue and increase its independence, eliminating its monthly payment of a fixed per-loan fee to a subservicer.
  • An IPO is on Lower’s longer-term roadmap. The fintech will focus on scaling itself over the next few years to strengthen its value proposition for its entry into the public markets. Lower isn’t the only mortgage-focused fintech to aspire to the public market: Offerpad and Doma went public via SPACs in March, while Blend filed for an IPO in April.