Home Co-investment

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I just received an offer in the mail from a company called Unison. I thought it was going to be just like any refi offer but it wasn’t.

The offer is a home co-investment. Basically they write you a check now and then they own a portion of your home. Has anyone heard of this before? I admit I have not looked into the details. It’s honestly a miracle I read the letter instead of throwing it away immediately.

Is this something that is happening a lot? It seems like getting a second mortgage or a cash out refi but with a different outfit.

Has anyone seen this or know anything about it? Is this just a huge scam?

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That would terrify me - like having a business partner but not someone you know or trust? And the business is the home you live in.

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That seems sketchy. I haven’t heard of it and I’m curious.

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So it is like an equity contract rather than a debt contract for a home finance? This is very weird and interesting and now I want to cover this. Haven’t heard of it

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I got one of these mails and did look into it, just to find the catch.

Unfortunately the money they give you is a loan.
After 30 years, or when you sell your house, you have to pay them back that amount.

And what does it cost you for the privilege of receiving that loan?

Unison’s percentage share in the home’s future change in value varies with the amount of your co-investment. With Unison HomeOwner, Unison’s share is typically four times the percentage we invested. For example, if we invest 10% of the current value of your home, we will receive 40% of the future change in value of your home.

… it costs a huge chunk of your home’s future appreciation.

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I’ve heard a lot of podcast ads for something similar!

ETA: HomeTap advertised on like NPR. I was sort of shocked

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Wow that is a HUGE amount of the future value of your home. This whole thing feels super icky to me, especially if you take the money and don’t use it for paying down high interest debt or other investments.

I might have to look into what the “interest rate” equivalent is for this type of loan under different scenarios. I feel like it’s going to be quite high.

So basically instead of an annuity type of loan this is a lump sum loan?

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That is bananas! I can’t believe it’s legal, but also can believe it’s legal.

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It’s like re-mortgaging or reverse mortgages, but for someone who has already done so and can’t again, I imagine. What happens when the house sells and there isn’t enough equity for the “partner” to take their share?

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So after some digging:

“After 30 years, you will either need to sell your home our buy us out. To buy us out you would need to pay the amount of your original co-investment plus or minus our share of your home’s change in value”

So you need to have a big check at the end of 30 years or take out a mortgage or sell your home.

The say many times this is not debt- how is this factually true? This is debt. It’s not an monthly payment but that doesn’t make it less of a loan……

“Unison’s agreement to share in any loss of home value alongside you, only kick in after five years”

“Though unison co-investment is not a loan, it is also not compatible with certain kinds of loans. Reverse mortgages, interest only loans, shared application loans, or any loan with a negative amortization feature won’t work alongside unison”

There is a deferred maintenance adjustment if you don’t maintain the home.

“Unison has the right to foreclose on your property to protect its investment, similar to a lender”

Fees:
3% transaction fee
Appraisal

It seems like the only thing that makes this not a loan is that if your house value goes down you dont owe them any money?

It says they are considered “subordinate financing”?

Math:

For 10% “coownership”

Home value 400,000
Loan from Unison - 40,000

12% increase in value
Without unison- you would receive $448,000 on the payout of your home
With unison= value of your home - 40% of increase in value = $448,000 - (48,000*0.4) = $428,800

So basically doing this will cost you $19,200 but you get a shiny check now of $40k.

At the end of 30 years you will owe Unison $59,200

For 17.5% “coownership”

Home value 400,000
Loan from Unison - 70,000

12% increase in value
Without unison- you would receive $448,000 on the payout of your home
With unison= value of your home - 70% of increase in value = $448,000 - (48,000*0.7) = $414,400

So basically doing this will cost you $33,600 but you get a shiny check now of $70k.

At the end of 30 years you will owe Unison $103,600

So does this mean that you owe $33,600 of interest paid on a $70,000 loan? Is that the right equivalent language I should be using? So after 1 year the rate is 48% interest, after 5 it’s 9.6% and after 30 it’s 1.6%?

This doesn’t account for any fees. I do not like this one bit. Also I want to hire their website design and copy editor because they did a great job making this look like a good thing.

@anomalily you are way more savvy than me, I think this is something you could cover in way easier to understand terms.

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Additional info: it is not a loan, the technical term is an option contract. So it’s like options trading on stocks or precious metals. SO WEIRD.

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Lord I’m deep in options contracts right now for studying for the Series 65 exam and this is actually a perfect example of an options contract and I didn’t see it.

Gosh I want to report on this, after this exam! Thank you for bringing it up.

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