Unison Review: Sell Equity In Your House

What if you could take out a home equity loan and not make a single payment for 30 years?

With traditional financing options, that's not possible. However, Unison, a home ownership investing company, can make that scenario reality.

But the extra flexibility comes at a cost of the future appreciation in your home. Is it worth it? Here’s what you need to know about Unison.

What Is Unison?

Unison is an investment company that lends you money in exchange for a share of future appreciation in your home. Unison will make a co-investment in your property up to 17.5% of it's current value with a minimum investment of $30,000 and a maximum of $500,000.

In exchange, Unison will take a cut of your home's future appreciation. Typically the exchange is four times the investment percentage.

So for example, if Unison invested 5% of your home's Original Agreed Value, it would receive 20% of it's future value. The most it could receive is 70% since the max investment it will make is 17.5% of your home's value (17.5% x 4 = 70%). But Unison doesn't get its cut until you sell your home or until 30 years have elapsed. Until then, you don't have to pay a penny.

Unison typically only invests in owner-occupied properties since rental properties tend to experience more wear and tear over time. However, it says that special pricing may be available upon request for some non-owner-occupied properties.

How Unison Works

Say you own a home that's worth $250,000. You receive a 10% investment from Unison of $25,000 and Unison gets to keep 40% of the appreciation. After seven years, you sell your home for $350,000 which is a $100,000 appreciation.

At that point, you’ll pay Unison $25,000 in principal return plus 40% of $100,000, or $40,000. In total you would pay Unison $65,000. The remaining $35,000 of appreciation profit is yours to keep.

All of the equity you built up through mortgage payments is yours to keep as well. So, for example, if you had paid your mortgage down by $30,000, you'd walk away from the sale with a total of $65,000 in your pocket ($35,000 from appreciation + $30,000 from the equity you built by paying down your mortgage).

What Happens If My House Declines in Value?

As an investor, Unison shares in upside potential and downside risk. That means it will take the same percentage of losses due to depreciation as it takes for profits due to value growth.

Again, let's say you have a house that's worth $250,000 and you take $25,000 of Unison’s money in exchange for a 40% share of your home's future value. But instead of rising, the house value falls to $200,000.

After seven years, say you sell the house for $200,000. You pay off your mortgage balance ($175,000), and you have $25,000 left over. Now you’d have to pay Unison its principal balance ($25,000) less its share in the loss. Its share in the loss would be 40% of $50,000 or $20,000. In total you’d pay Unison $5,000, meaning you’d walk away from the sale of the home with $20,000.

However, there are two important caveats to this scenario. First, if you sell within five years (three years in some cases), Unison won’t share in your losses. Second, if you haven’t done proper maintenance on the house, Unison may change its proportional share of the losses. The details about maintenance will be in your contract.

Does Unison Have A HomeBuyer Program?

Yes and no. Unison has built a program for home buyers. But the Unison HomeBuyer program is currently not accepting new applications.

If and when the pause on applications is lifted, Unison HomeBuyer provides down payment assistance. As a homebuyer, Unison will lend you up to 10% of the purchase price for a down payment. You’ll also need to put in an additional 10% of the value yourself.

Using Unison could help homebuyers avoid PMI. Again, Unison will receive a percentage of your home's future value in exchange for providing the down payment assistance. And just as with the HomeOwner program, you don't have to pay back Unison's co-investment until you sell or after 30 years. 

Can I Refinance My Main Mortgage?

Unison will allow you to refinance your mortgage, within limits (which we'll discuss in a moment). But securing financing could prove difficult. 

Your Unison investment is technically a form of subordinate financing. Because of this, Unison says it’s likely that some lenders will decline your application, especially those that provide conforming loans.

Unison also sets its own "Maximum Authorized Debt Limit." This limit is fixed so it won't ever increase even if your home's value rises.

Can You Buy Unison Out?

Yes, if you still live in your house after 30 years, you'll have to buy Unison out or sell your house and pay back the loan. You may be able to buy Unison out by taking out a HELOC, home equity loan, or even a reverse mortgage if you’re over age 62 by then.

But you can also simply use cash to buy out Unison at any time after the 3-5-year restriction period. For example, if you plan to use the money you receive from Unison to invest in a second property or business, you may be able to use your investment returns to pay back Unison quickly without having to sell your home.

Where Is Unison Available?

Unison isn’t currently only available in about half of the states in the U.S. These are the places where it currently invests:

• Arizona
• California
• Colorado
• Delaware
• Florida
• Illinois
• Indiana
• Kansas
• Kentucky
• Michigan
• Minnesota
• Missouri
• Nevada
• New Jersey
• New Mexico
• New York
• North Carolina
• Ohio
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• Tennessee
• Utah
• Virginia
• Washington
• District of Columbia / Washington D.C.
• Wisconsin

Are There Any Fees?

Yes, Unison charges a 2.5% origination fee that is deducted from your investment amount. So for you example, if you're approved for a $25,000 investment, the actual amount you receive will be reduced by $625 to $24,375.

You'll also be responsible to cover all third-party costs that are required to close the investment. For example, you'll need to pay for the home appraisal yourself as well as settlement costs such as title, state taxes, and recording fees.

How Does Unison Compare?

Unison's two main competitors are Hometap and Point. Of the three, Unison charges the lowest origination fees at 2.5%. It should also be noted that Unison bases the value of your home on the appraisal minus that fee and won't discount the appraised value any further. Point, on the other hand, reduces your appraised value by 15-20% as a "risk adjustment."

Unison and Point allow a maximum of 30 years before repayment is required. Hometap, however, requires its investments to be repaid within 10 years which provides much less flexibility. Still, Hometap could be a good option if you have mid-range credit as its minimum credit score is just 500.

See all the HELOC alternatives here.

Check out how Unison compares in this quick chart:

How Do I Apply

To apply with Unison, begin by visiting its website and clicking the "Get Started" button at the top right-hand corner. Next, you'll type in your street address to get an instant estimate.

If it looks like your property might be a good fit for a Unison investment, you can continue working through the application process. The process is similar in many ways to getting a mortgage. A home appraisal will be required and you'll need to provide financial documents as well.

You'll need a credit score of 620+ to qualify for a Unison investment. Unison will run a soft check on your credit reports that won't impact your credit score.

That's the only credit inquiry you'll deal with throughout the entire process with Unison. Remember, you're not applying for a loan that requires monthly payments. So unlike traditional lenders, Unison won't require a hard credit pull down the line when you're ready to finalize the deal.

How Do I Contact Unison?

New applicants can reach Unison at 1-800-330-9400 while existing customers should call 1-800-330-5800. Customer service hours are Monday through Friday, 9 AM to 5 PM (PST).

Currently, Unison's rating on Trustpilot is "Excellent" with an average rating of 4.3/5 from 40+ customer reviews. The company is also accredited with the Better Business Bureau (BBB) and has an A+ rating as of writing.

Is It Worth It?

Most Americans build up the vast majority of their wealth inside of their homes. That means that recommending any financial product that erodes home equity could leave the average person poorer.

That said, I think that using Unison could make sense if you want to tap into your home equity for an investment. For example, you may want to buy a rental property using Unison for homeowners and a mortgage from your primary bank.

It could also make sense to use Unison for homeowners if you need cash to buy inventory for your business or otherwise fund your start-up costs.

Unison FAQs

Let's answer a few of the most common questions that people ask about Unison:

Can Unison force you to sell your home?

Yes, if after 30 years you're unable to settle your investment, you'll be forced to sell your home and Unison will take its cut of the appreciation or loss.

Can I buy out Unison at any time?

While you're always able to sell your home to settle your investment, Unison does not allow "special terminations" within the restriction period (3-5 years).

What if I make home renovations?

If the home improvement takes places after three years, you can request a "Remodeling Adjustment" to ensure that Unison won't share in the value you added to your home via the renovation.

What is the maximum loan-to-value (LTV) ratio that Unison will accept?

While allowable LTVs vary by credit score, the maximum LTV for applicants with excellent credit is 75%.

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