BETR — Q2 2026 Financial Report Analysis

Loans up 38%, loss barely narrower: Better's volume is growing, but the improvement is thinner than it looks

Better Home & Finance (Better.com), an online mortgage lender, funded $1.67 billion of home loans in the second quarter of 2026. That is 38% more than a year earlier, and it pushed total net revenue up 28% to $54.7 million. The net loss narrowed from $36.3 million to $30.6 million. Most of that $5.7 million improvement, though, came from the UK bank Better is trying to sell (now reported separately as "discontinued operations"). The loss from the mortgage business Better is keeping was $31.5 million, against $32.4 million a year ago. The quarter also included a one-off $6.5 million reserve release. On the same day, management guided third-quarter loan volume and revenue lower, and the founder-CEO had stepped down three days before results.

At a glance

• $1.67B loan volume (+38%): growth came mainly from refinancing, which more than tripled, and from partner-sourced "Platform" loans. Loans sourced directly from consumers were slightly down.
• -$14.0M adjusted EBITDA: this was the weak end of guidance even after a $6.5 million one-time release of a compliance reserve. Without that release, the figure would have been about -$20.5 million.
• $57.9M shareholders' equity: up from $8.6 million at March 31, mainly because of a $66 million share sale in the quarter. Better still depends on outside capital to cover its losses.

Key figures

Better reports no separate operating-profit line, so the margin above is pre-tax loss divided by total net revenue. Interest on the short-term loans that fund mortgages is already inside revenue (as net interest income), so this is close to an operating margin.

Takeaway: The volume growth is real, but it was carried by a refinancing burst that is already fading. Refinance volume fell 36% from Q1 to Q2, and management guides Q3 loan volume down 9–18% from Q2. Strip out the one-off reserve release and the adjusted loss was about $20.5 million, well outside the -$12.5 to -$14.0 million range management had guided to. Better's ability to keep funding losses of that size through raising new shares, not the growth rate, is the variable that matters right now.

How Better makes money, and what moved

Better earns almost all its revenue (94% this quarter) by originating mortgages and selling them on to investors within days. The "gain on loans" is the premium investors pay over the loan amount. That makes revenue roughly loan volume × gain-on-sale margin (the premium as a share of volume). Margin was steady at 3.09%, so revenue growth came from volume.

The volume mix matters more than the total:

Q1 figures are derived from the 10-Q's six-month totals minus Q2.

• Purchase loans grew 2.6% year over year. Purchase lending is the steadier, less rate-sensitive part of the market (people move for jobs and family regardless of rates), and Better's share of it barely grew. The 40% jump from Q1 is the normal spring buying season.
• Refinancing produced most of the growth. Homeowners refinance when rates dip below what they're paying. Refi volume of $549 million was more than three times last year's, but it was down sharply from Q1's $853 million. The 10-Q says mortgage rates "remained elevated throughout the quarter", and the CFO said industry mortgage applications fell more than 15%.
• Home equity (HELOC) loans rose 45% from Q1. These let owners borrow against their house without giving up a low existing mortgage rate. Demand for them tends to rise when rates are high, and management calls scaling this product a top priority.

By channel, Platform volume (loans sourced through partner lenders and Better's in-market loan officers, using its "Tinman" software) more than doubled to $912 million, 55% of the total. Direct-to-consumer volume slipped 2.5% to $755 million while marketing spend fell 15%. The B2B channel with Ally Financial was wound down and contributed nothing.

Smaller lines went the other way. Other revenue fell from $3.1 million to $1.1 million, mostly because Better sold its UK broker Trussle in Q3 2025. Real-estate referral volume dropped to $54 million from $93 million. Net interest income fell to $2.1 million from $2.8 million as warehouse borrowing costs rose with volume.

What the headline numbers hide

• The net-loss improvement is mostly the UK bank, not the mortgage business. Birmingham Bank, a UK bank Better bought in 2023, is now held for sale and reported as discontinued operations. It swung from a $3.9 million loss to a $0.9 million profit, which is $4.8 million of the $5.7 million improvement in net loss. The loss from continuing operations improved by only $0.9 million. For the first half, discontinued operations lost $20.1 million, including $16.3 million of "other expenses" in the bank unit.
• Stock compensation more than tripled and drives the GAAP loss. Stock-based compensation, a non-cash charge for shares granted to staff, was $14.6 million against $4.3 million. Of that, $11.8 million came from performance stock units tied to share-price targets, which the company judged likely to vest from Q1 2026. Excluding it, total expenses were about $71.5 million, up only 1.2% on a year ago while revenue grew 28%. That is genuine operating leverage (costs staying flat as revenue grows). But the stock awards are a real cost to shareholders through dilution.
• Adjusted EBITDA was flattered by a one-off. Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, with stock comp and some other items also removed. The -$14.0 million includes a $6.5 million benefit from releasing a reserve for "TRID" defects (errors in federally required loan disclosures) on loans made before June 2022. The 10-Q says loan origination expense fell to $3.5 million from $3.9 million on 38% more volume "driven by a reduction in the estimated liability for the potential TRID defects." Without the release, adjusted EBITDA was about -$20.5 million. Q1's guidance for Q2 was -$12.5 to -$14.0 million.
• Loss per share improved faster than the loss because there are more shares. Weighted shares rose 22.8% to 18.65 million. Loss per share narrowed 31%, about twice as fast as the net loss (16%), partly because that loss is spread over more shares.
• Loan-repurchase costs ticked up. When Better sells loans it promises investors they meet certain standards, and it must buy back loans that don't. Last year's quarter had a $0.4 million recovery on that reserve. This quarter had a $0.9 million provision (money set aside for expected losses). It is small, but it now subtracts from gain on loans.
• Cash burn is funded by equity raises. In the first half, the continuing business lost $80.8 million. Removing non-cash items (stock comp $38.4 million, depreciation and amortisation $6.0 million, warrant revaluation $5.1 million) still leaves roughly $31 million of loss for the half (our rough calculation from the cash-flow statement). Cash and equivalents rose to $102.3 million from $79.4 million in December, but only because Better raised about $66 million in an April share offering, $11.9 million through at-the-market share sales in Q1 and $5.7 million from a warrant exercise.

Balance sheet and funding

• Equity is thin relative to obligations. Shareholders' equity was $57.9 million against an accumulated deficit of $2.18 billion. Better Mortgage's adjusted tangible net worth was $109.5 million, against a most-restrictive regulatory minimum of $85.0 million. That leaves a cushion of about $24.5 million, roughly one or two quarters of underlying losses at the current rate. The 10-Q also notes that Fannie Mae and Freddie Mac set limits on net-worth declines and impose "quarterly profitability requirements"; Better says it was in compliance.
• Debt: $198.8 million of 6% senior secured notes, held by a SoftBank affiliate and due December 31, 2028. Better can pay the interest in additional notes instead of cash, which it did in December 2025.
• Warehouse lines (short-term credit used to fund loans until they're sold): $454 million drawn of $850 million available across three facilities, all maturing between January and April 2027.

Leadership and governance

• On August 3, 2026, founder Vishal Garg stepped down as CEO. Board member Daniel Lewis, who joined the board on July 27, became interim CEO.
• On August 20, a Special Committee of the board adopted a limited-duration shareholder rights plan (a "poison pill"). It penalises any person or group that acquires 15% or more of a share class without board approval, and the company says it is meant to ensure holders receive a premium in any takeover.
• The cost-cutting target was raised to more than $45 million of annualised savings by year-end 2026, up from $25 million.

Outlook

Management's Q3 2026 guidance:

The guidance fits the mix shift above: refinancing is falling away and purchase volume usually softens after the spring. The interim CEO's plan is to grow through enterprise and wholesale partners and to offer the HELOC product beyond direct-to-consumer "later this year". That plan aims to make growth "less dependent on the macro environment".

Our read: the business has real operating leverage. Revenue grew 28% while costs excluding stock comp were flat, so the loss should narrow quickly if volume holds. But Q3 guidance says volume won't hold this quarter, the underlying adjusted loss is around -$15 to -$20 million a quarter, and the net-worth cushion over the regulatory minimum is about $24.5 million. That makes the next six months a question of funding as much as growth.

What to watch in Q3:

1. Whether HELOC and Platform volume grow enough to offset refinancing.
2. How much of the more than $45 million cost-cut target shows up in expenses.
3. Whether Better raises more equity or sells Birmingham Bank (which would release capital).
4. Any change in the CEO search or under the new rights plan.