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For many, especially the young, one of the biggest obstacles to home ownership is saving up enough money for a down payment. According to a report by Inside Mortgage Finance, over the 12 months to August 2017, around 1.5 million borrowers have purchased homes using less than a 10 percent down payment. Buying with a low down payment increases the amount these buyers need to borrow, raising their monthly mortgage payments and making home ownership even more of a stretch. Now, a new lender believes they have found a way to help homebuyers raise their down payment as they buy.

Seattle-based start-up Loftium provides prospective home buyers with up to USD 50,000 for a down payment. In exchange, the home buyers must agree to continuously list one bedroom on Airbnb for between one and three years, and share around two-thirds of the income with Loftium. To make hosting easier, Loftium supplies automated messaging, smart pricing, an automated keypad for the front door, linen and toiletries for the spare room, as well as cleaning resources. The company determines the size of down payment it is willing to put up by using an algorithm that predicts how much income a room is likely to generate. Home owners are given just eight ‘freebie’ days a year to use the room for their own purposes, but if the room does not generate enough income to cover the down payment within the agreed-upon contract period, Loftium takes full responsibility for the loss.

At the moment, the program is only available in Seattle, where buyers are able to apply the down payment only to mortgages financed through Umpqua Bank. In the future, Loftium hopes to expand to more cities, and to work with a wider range of lenders and rental services. Other companies have already attempted to address the high cost of buying with innovative housing solutions such as a rooftop micro-house built around an air duct, and quickly built mini-homes constructed inside empty buildings. What part will Loftium’s model play in helping more people to buy homes?