Unison Homeowner Equity Access is Probably a Terrible Idea!

While researching different ways to access home equity for my last post on hacking your mortgage into a high interest savings account, I came across an interesting company I hadn’t heard of before. This company, Unison, offers a way to access the cash tied up in your home equity without any interest charges or monthly payments! Sounds great at first glance, but of course there is a catch to go along with it. That catch is that they are effectively “investing” in a portion of your home and will take a share of any appreciation or depreciation when you eventually sell (or at the end of 30 years if you still live there). To protect the value of your home, make sure you take a look at some home warranty reviews.

This seems like a pretty fair trade at first because you’re getting access to a large amount of cash without immediately paying anything for it (aside from opening fees), but it’s important to take a look at the fine print and calculate how much this eventual appreciation might amount to. I’ll crunch a few possible scenarios below and you can decide for yourself whether a Unison Homeowner equity loan is something worth thinking about. When it comes to

How the Unison Homeowner Equity Loan Works

I won’t cover every single detail of how the Unison Homeowner program works, but here’s the details I deemed important:

  1. Unison will give you a cash amount worth between 5 and 17.5% of your home’s value, so long as that amount doesn’t put you at more than an 80% LTV ratio against the home.
  2. There will be no monthly payments or interest charges on the loan.
  3. When you decide to sell your home, Unison will share in the appreciation or depreciation of the house as well as take their initial loan amount out of the sale price.
  4. Unison’s share of the change in value is equal to 4 times the initial loan amount. For example, a loan of 10% of the home’s value would mean Unison gets 40% of the change in price.
  5. If your house sells for more than it was appraised for at the time of the loan, Unison will take the initial loan amount plus their share of the price increase.
  6. If your house sells for less than it was appraised for at the time of the loan, Unison will take the initial loan amount minus their share of the price decrease.

Those are the basics laid out front and center on the Unison Homeowner’s webpage, but there are few additional items to keep in mind:

  1. There will be an immediate 3.9% transaction fee on the amount loaned.
  2. If you decide to sell your home within 3 years, Unison will not share in any depreciation and other special provisions apply.
  3. After 3 years, it is possible to buy Unison out of the deal by paying back the loan plus change in home value as determined by an appraisal.
  4. Home Improvements made on the home can bring up the “cost-basis” of the home as determined by an appraisal.
  5. If you do not maintain the property, Unison may take a “Deferred Maintenance Adjustment” to make up the difference as determined by an appraisal.
  6. If you don’t sell the house within 30 years of taking the loan, Unison will take their loan back and their share of the property value change as determined by an appraisal.
  7. Unison cannot be used with rental properties, you will need to buy Unison out first if you want to convert your current home to a rental.

It definitely starts to get complicated if you consider all possible outcomes of your future home, so let’s stick to a possible standard use of the loan.

How Much Is The Share of Appreciation Really Worth?

The main selling point on this particular type of loan is the lack of traditional interest and monthly payments. While that probably sounds great to a lot of people trying to access money from their home, my first instinct is to try figuring out where they are getting their money from. Hopefully that’s your first thought as well when you think about getting into a deal that looks great on the surface.

Setting aside the 2.5% upfront fee and additional closing costs, the primary way Unison is making their money is on home values appreciating over time. What isn’t clear until you run the numbers is how much that’s actually worth.

Of course we can’t predict the future of home values, but we can look at the historical average and see where that falls to at least get a starting point.

Based on data from the Federal Housing Finance Agency’s Housing Price Index, we can look at average home value changes over time. Here’s a description of the index if you’re curious:

“The HPI is a broad measure of the movement of single-family house prices. The HPI is a weighted, repeat-sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties. This information is obtained by reviewing repeat mortgage transactions on single-family properties whose mortgages have been purchased or securitized by Fannie Mae or Freddie Mac since January 1975.

The HPI serves as a timely, accurate indicator of house price trends at various geographic levels. Because of the breadth of the sample, it provides more information than is available in other house price indexes. It also provides housing economists with an improved analytical tool that is useful for estimating changes in the rates of mortgage defaults, prepayments and housing affordability in specific geographic areas.”

As you may already know, housing prices and their changes vary wildly depending on where you live. Despite the obvious downside of using a broad average of the US, it should do for our example calculation here.

First, I pulled down the data from this link that summarizes the index for each of the 9 regions as well as the overall USA. Then I applied a simple CAGR formula to the start and end values of 1980 to 2017 to get an average annual growth rate of 3.73%.

Now we have to use that average growth rate to figure out how much effective interest we’re paying on this “interest-free” loan. Let’s use an example where you pulled 10% of your equity out of your house in cash in exchange for giving Unison a 40% share in the appreciation. That means Unison would be entitled to 40% of the average 3.73% growth each year or 1.49% of your total home’s value annually. As the loan was for 10% of the home’s value and Unison will make an average of 1.49% of the home’s value each year, that makes the effective interest rate 15%!

As the ratio of loan to share of appreciation is 4:1, the actual amount taken out (between 5 and 17.5%) doesn’t change the effective interest rate.

15% is a huge interest rate compared to the other options available for accessing home equity!

Other Options for Accessing Home Equity

While the “no interest, no monthly payments” loan might sound appealing, there are much cheaper ways to access that money in the long run such as:

  1. Cash-out Refinance
  2. Home Equity Loan
  3. Home Equity Line of Credit

In fact, the effective interest rate is so high, it would probably make more sense to just get a personal loan from a bank, credit union, or one of the fancy peer to peer networks!

The Breakeven Point of a Home Equity Loan vs. Unison Homeowner

While the 15% I calculated above is huge, it was based on a broad average that won’t apply to everyone. Maybe you live in a specific part of the US in which you think property values are pretty stale and can’t even keep up with inflation. Let’s calculate how little the appreciation has to be for this type of loan to be comparable to a more traditional Home Equity Loan.

First, we need to start with the interest rate of the Home Equity Loan. While it will vary by bank (+ credit score and other factors), a little bit of personal research revealed that it wouldn’t be difficult to lock in a fixed interest rate 1 or 2 points above the prime rate (4% as of writing) for a traditional Home Equity Loan. With a little bit of effort, you might even be able to find something lower, but we’ll take the conservative estimate on the higher end of what I found: 6% fixed.

Now we just have to reverse engineer the equation we used above to get the yearly property appreciation that would give us an effective interest rate of 6%. This number comes out to 1.5%.

So if your best option for getting home equity out with a traditional loan or refinance comes out to 6% AND you expect your home to appreciate less than 1.5% each year (less than inflation in most years), a Unison Homeowner loan could be right for you. Just don’t forget about the fees to get the loan started and the additional constraints you have regarding your home going forward.

When a Unison Homeowner Loan Might Make Sense

Given the very high effective interest rate on the average appreciation case, a Unison equity loan probably won’t make sense for most, but here are a few situations I think it might.

  1. If you are very confident that your house’s value is moving sideways or down, and that means not even keeping up with inflation (and Unison thinks the opposite).
  2. If you want to bet against the value of your home going up (while still maintaining a perfect maintenance record).
  3. If you can’t get approved for traditional equity access or a personal loan, but still need access to cash (seems unlikely).

Personally, I can’t come up with anything else. Can you think of a situation where this type of loan would make sense for the average person as opposed to the alternatives?

Why It Definitely Doesn’t Make Sense For Us

We bought a townhouse in Seattle a few years ago and the market has been on fire since then. Based on what we paid 3 years ago and our current Zillow estimate, the annual rate of growth on our property has been over 15%! I obviously don’t expect this to keep up forever, but I also don’t see it slowing down in the near future. There are a lot of people moving into Seattle and the rate that new housing is being built hasn’t been able to catch up yet.

If we assumed an average of 15% growth over the next 3+ years, we could end up paying an effective interest rate of over 60% on this type of loan!!! It’d be cheaper to just max out the cash advance limits on all of our credit cards if we were really strapped for cash!

Luckily, we’re not in the market for any kind of loan at the moment, so this has purely been a thought exercise.

If there’s any lesson here, it’s to not be fooled by any flashy advertising, always read the fine print, and be sure to always consider comparable options that may be cheaper.

Thanks for reading and hopefully someone thinking about a Unison Homeowner equity loan stumbles upon this post before pulling the trigger. Depending on where you live, it could end up being the most expensive loan you’ve ever taken!


251 thoughts on “Unison Homeowner Equity Access is Probably a Terrible Idea!

  1. I just received Unison’s flyer as well as their online Manual. Their e-mails to me contradict both. The e-mails say that the 3.9% fee doesn’t include the very things that the 3.9% fee are supposed to be for (appraisal, title and so on) and when I accuse them of false advertising they have no logical response. All they will say is that it is 3.9% plus $300-$500 depending on your county’s fees. Then the e-mails say that the 3-year penalty marker is really 5 years (for which they will not share in any loss of value). I too own my house outright and have no one to give it to. Age 66. Income only $471 in SS Retirement which makes me ineligible for Home Equity Loan and Reverse Mortgage. I thought this might be a good deal but now I am catching them in all these lies. Plus now from reading your stories about private low-ball appraisals I don’t know what to think.

    1. You may better off selling your hoe with the caveat of being able to enjoy the money now and a clause that states you get to live rent free until you expire…worked for Hue Hefner…I am truly sorry you have no family..but if u ever need a friend just holler back…

  2. Reading your comments are very interesting and very accurate however you do not consider the age factor of those who continue to make mortgage payments after the age of 70. 30 years from now makes a huge difference since the average age of a person is about 80 possibly even 90 . Could be that the question is do I want live with the unused equity sitting in the bank or do I want to enjoy the great things before death.

    1. Then I would consider in your shoes a reverse mortgage. You can get money for your home as long as you have 50 percent in equity, you can still leave your kids your home and they can pay it or sell it and pay off the reverse mortgage, it would mean no house payments for you.

  3. Thank you for your helpful research. I agree with a previous post – the only scenario in which this might work is as a kind of reverse mortgage for those of us not worried about living for another thirty years (and not worried about the compromised value of the house after we die).

    I’m sure Unison are not making these offers to owners of properties where they are anticipating a depreciation in the value of the property over time.

  4. I also received a flyer and started checking them out. Boy do I smell scam all over this deal. Thank you for the article. I really wish there were laws preventing companies like this one from scamming people. They are getting a sweet deal off people while making it look like they are providing a valuable service. Might appear you are getting money to use now, but considering you have to have pretty good credit to even qualify, your home will no doubt be appraised very low so they can get more out of your equity, and you can probably get a straight and honest loan for less anywhere, why would anyone do this?

  5. I first received a voicemail message about this and then a letter. However the County recorder shows my home was foreclosed about a year ago. This is the most well documented case of foreclosure fraud that exist; a 2006 Washington Mutual mortgage backed security. Washington Mutual failed in 2008 or 2009 and went into receivership by the FDIC who sold it to Chase. However it is a well documented fact that no mortgages were included in the sale and Chase even sued the FDIC over these mortgages.

    The assignments of Deed of Trust filed by Chase is completely fraudulent and a California appeals court ruled the foreclosing bank did not produce an evidence that they owned the mortgage. This was based on the Assignment of Deed Of Trust which was not signed by the FDIC when it sold Washington Mutual to Chase. It was only signed by a V.P from Chase and simply stated the FDIC assigned the Deed of trust to Chase whcih was completely false. My situation is exactly the same.
    Chase then sold the deed of trust and note which it did not own to begin with, to Select Portfolio Servicing, Inc. SPS is a totally fraudulent company that is actually controlled by Chase through joint marketing agreements. So SPS is in fact a debt collector for Chase. SPS is a total violation of the Dodd-Frank act which the Consumer Financial Protection Bureau did not enforce. Then the Republican forced the Director to resign and turned around and repealed and replaced the Dodd-Frank Wall Street Reform Consumer Protection Act with the new Economic Growth Regulatory Relief Consumer Protection Act. This then relieved the CFPB of its responsibilities under the Dodd-Frank Wall Street Reform Consumer Protection Act whcih obligated the CFPB to take action to stop debt collection agencies disguised as mortgage servicers from operation. As regulator the CFPB had the power to revoke the licenses form companies like SPS whose sole purpose is to fraudulently foreclose on homes and essentially attempt to coerce people into selling their homes rather than loose their home to foreclosure.
    I have know received a totally fraudulent eviction notice from the Sheriff base on a totally fraudulent unlawful detainer based on the most well documented case of foreclosure fraud. In the third Appellate Court of California (Sacramento) C073207 Super. Ct. No. # 34201100097598CUWEGDS ANDREW KALNOKI et al..,Fist American Trustee Servicing Solutions, LLC et al.., and ANDREW G. KALNOKI et al., v WELLS FARGO BANK N.A. the court ruled “The foreclosing bank had offered “no evidence to establish that JPMorgan Chase Bank had the beneficial interest under the 2003 deed of trust to assign to the bank.” (Ibid.)

    This was filed on February 1, 2017 and I provided a copy of this case to First American Trustee Servicing Solutions becasue they sent me the notice of default and were hired to foreclose on my homes. Nonetheless they committed fraud and filed a Notice of Default on October 31, 2017 whcih was only 9 months after the appeals court ruled in the above cited case and then proceeded to foreclose on my home in direct contract to the courts ruling.

    Now I have just received this letter from Unison on June 22. 2019, two years after the home was fraudulently foreclosed when it Unison is only for people who own their homes. I was also served with a fraudulent eviction but this does not include other occupants so does not appear to have any value as there is no way for the Sheriff to know who the other occupants are. However Unison requires an appraisal whcih includes an inside inspection so this could be a way to establish if there is any evidence that anyone occupies the residence. It just seems very suspicions I would receive this letter from Unison two years after the foreclosure.

  6. Thank you so much for doing the math this is going to cause a lot of people a lot of heartache if they did not run across your post. We just received the mail flyer and were peaked at how it worked. Saved me a lot of heart ache and gave me some really great options on ow to get cash if needed…funny how things work out it was a blessing to see your post..Gil

  7. Hear me out and please, and poke holes in my plan. I think I could make this work in my favor.

    My home is worth about 450K right now. The home was built in 2006 and sold for 485K, right before the 2008 crash. That puts me pretty close to the pre-crash value. I owe about 298K on the mortgage.

    Real estate is at a high right now, and I am not saying we’re going to crash like 2008 (although possible), but we’re not going to be on a bull run like this forever. Home values can keep going up, but mush more incrementally in the coming years, unlike the past 3-5 years.

    If I maximize the equity they’ll give me, let’s round it to 75K ($78,750 is the actual number, based on home value of 450K, but I’m subtracting the 3.9% transaction fee), 70% my future appreciation is now at stake. So if my home goes up to 550K, a 100K increase, they’ll take 70K.

    Now, my plan is to take the equity and immediately invest in another real estate property. This puts me on the same playing field as they are in a sense. If the market goes up, so does my investment property. Market goes down, so does the home I own, and ultimately what I owe them.

    I plan on exiting Unison ASAP, which is three years, but I maintain the option of hanging on longer if I choose to do so based on the market at that time. I plan on exiting by selling my house.

    Do I think my home will go up 100K in three years? Heck no. 50K? Probably not. Let’s say 40K, that means their cut is 28K. By three years time, if the value goes up, there is more equity in my home after the Unison deal for three reasons;
    1) Increase in home value (50K in this example)
    2) payments against principal (about 28K, leaving my mortgage at 268K)
    3) I never took 100% of the equity available in the first place

    Getting them their money of about 105K should be cake. Sold at 500K, mortgage at 232K, minus what I owe Unison leaves me with 127K plus an investment property.

    Now, the argument is the 28K Unison got paid from my increase in home value. But remember, for the past three years, I have purchased an investment property and have been collecting rent and building equity there. I understand this all assumes everything goes well with the investment property, and I realized this is a big assumption. But none of that would have been remotely possible for me if I never did the Unison deal.

    Lastly, that example if an increase of 40K in my current home value within three years. If the value goes down? That puts me in a golden place. They share in the loss, and there’s not appreciation cut to share with them. Then it’s my call… sell my home for less than what I paid for, or sit on it until the value is where it was when the Unison deal was made. That means, I got a nearly free loan of 75K for three years (just the 3.9% transaction fee) which beats HELOC’s and Home Loans by a long shot.

    If it’s too good to be true, it probably is, but unless my estimates are way off, or I’m missing something big, this sounds like a no-brainer to me. I would love to get someones thoughts here.

  8. I am 80yrs old , divorced, retired and live in Southern California, my home value is 1.2 mil. I got caught up in
    a Hero Loan scam where my property tax went from a little over $800.00 (prop 13) to over $13,000.00 a yr. This is a 30yr loan with an APR of 9.34% which I was not aware of at the time. The loan total is a little over 120.000.00, which I’ve been paying since 2016. I have quite a bit of equity in my home, but I’m wondering if Unison might be the way to go. I would be able to pay off the hero loan which is a tax lien on my home, and not be under so much stress. I would like to have any and all suggestions on my situation.

  9. My wife and I are 66 and 65. We plan on living in our home for the rest of our lives. Our children will be happy with whatever they have left after selling the home. Either it will lose money, in which case they would lose money regardless of Unison. If it gains, they will get the current appraised value plus 30% of the appreciation.

    Our retirement is not dependent on the appreciation of our home.

    I will be able to pay off our home with the money from Unison along with some of our retirement. I’ve calculated the loss of income from the withdrawal and find I will still have a net ~$500 positive impact.

    I am interested in people telling me where I my thinking is wrong (I really am interested).

  10. Thank you for posting your insight. Although the BBB isn’t calling this company a scam they should be. People that are struggling with finances now aren’t going to be able to pay off this ridiculous loan later. Basically sounds like after 30 years they take most of the equity out of your house so you end up with probably not even enough money to purchase a new one. An interest rate of 15% -60% is robbery. Thank you so much for doing the math you are saving a lot of people from experiencing devastation.
    A saying my dad taught me “If its too good to be true it isn’t true.

  11. My two cents:

    On the surface, taking one of these loans seems nuts. Let’s say your home is worth $500k and they advance you $50,000. When you sell the home or die, you or your heirs pay must share with Unison 40% of the appreciation between the $500k appraisal and the sale price. The national average is 3-5% appreciation per year. Looking at a 10-year window using the 3% appreciation number, that $500k house will be worth about $672,000 at the end of 10 years. 40% of the equity increase of $172,000, or $68,800, plus the original loan amount of $50,000 for a total of $118,800, goes to Unison leaving you $53,200. A ten-year second mortgage for $50k at 4.2% would result in a new monthly payment of $511 including $11,319 in interest and a total of $61,319 in payments. In the same 10-year window at an 5% annual appreciation rate, the $500k house would be worth 814,447. 40% of the equity increase of $325,779, or $130,312, goes to Unison leaving you $195,467. Of course, that ten-year second still only costs $11,319 in interest with an additional payment of $511 per month for ten years. Don’t forget you can deduct the $61,319 from the Unison share when comparing because you make no payments with Unison.

    Nevertheless, this leads me to conclude, in the context of an apples to apples comparison of acquiring the funds in a typical scenario for an average borrower with good credit, these types of loans ARE nuts.

    However, what if you are 70-75 years old, have tons of equity in your home, but do not qualify for a second mortgage (or know in your heart of hearts that the additional payment will be hard to make) or an equity line? What if you have recently declared bankruptcy and can’t get any kind of loan? What if all or some of the above are true and you are sick and need money for co-pays and deductibles? What if your house is urgently in need of repairs and you don’t have the cash? You need money and this may be the only way to get it.

    The truth is, there is no one size fits all judgement because there is a practically infinite set of circumstances. These loans could work for some. I recommend breaking out the spreadsheet and doing your own analysis factoring things only you could know, including a realistic assessment of your home’s likely appreciation (you could start with going to Zillow and seeing how it appreciated over the prior ten or 20 years), your likely longevity (people have a tendency to live longer than they think they will), how long you intend to stay in the house, how high you prioritize leaving your kids that home equity after you die (maybe you invested in a good education for your kids and they don’t need the biggest possible inheritance), and all the alternatives within your reach, including conventional financing and reverse mortgages.

    I would also shop around. There are other companies doing this. They’re all probably similar, but maybe not!

  12. I’m 80 years old, a widow, do not have a mortgage, and I have a very high credit rating. I live in a high-end suburb of Seattle (stable home values), home built in 1999, and my current Zillow home estimate is $700,000. Baring unforeseen circumstances, I have sufficient cash and investment funds to live comfortably, but not enough to do some minor home improvement upgrades and to travel. Extra cash would allows this. I don’t plan on leaving anything to my heirs. My will gives my assets to two non-profit organizations. I am active, in excellent health, and plan to live in my home until I am forced into an assisted living arrangement. If/when that happens, I would then sell my home and use the proceeds to pay for an elder care facility. Is there a downside I’m not seeing with taking up to 17.5% of the equity in my home (even though there is a cost for this – 3.9% plus whatever). I’ve read other comments, scrutinized various Google sites, etc. and also have read the large legal document from Unison.

    There’s no free ride. A Home Equity Loan would require repayment with funds I can’t afford, and a reverse mortgage is scary for several reasons. I’d love some well-reasoned feedback. Thanks!!

  13. I have the Unison offer in front of me. After reading all the great comments and suggestions, I welcome comments from anyone who’d like to share his/her thoughts. We are 76 and 75 respectively, living in a large age-restricted community. We have no children, and almost no debt other than mortgage and a car lease, and we pay our credit-card bills, mainly Amex, in full very month. Our respective FICO scores are above 815. Our combined assets, liquid and home, are about $900,000, and we have annual income of about $125K from stock dividends, pensions, annuities and Social Security. Our free-standing home was appraised for $425K in 2018, and our mortgage -the only mortgage- is about $206K. Other than each other, our beneficiaries will be designated charities.

    Subject to appraisal, the Unison offer is about $84K, which we would probably invest in interest-paying stocks if we did the deal.

    Comments and advice will be greatly appreciated.

    1. You don’t need the money then this is not for you. Not a good way to get investment capital. If you are paying off high interest debt then yes but you said you don’t have debt. So my advice is use a conventional HELOC to get investment income. if you are planning on donating to a charity(s) upon death, you can get tax benefits now by pledging that money and continue to enjoy the income until your death.
      Really, you need a one time trip to a investment advisor to give you more concrete ideas. But these two were for free!

  14. Although you do show an effective interest rate computation on the Unison investment, you do not counter that with the interest on the ‘new’ loan for complete comparison. There is no accrual on the unison loan. When you calculate the future interest payments on a new loan, the increased out of pocket monthly expenses of the new loan, and the differences in the costs of the two types of loans, the actual dollars do not look nearly as bad as saying this is an effective 15% loan.

    In fact, when I compared either getting a new loan or a unison loan to realize $50k of my equity, and selling the home in 6 years (using the past 5 years of property value growth in my area continuing as a guide), if I sell my home in 6 years, Even though Unison stands to see over $30k above the payoff, I would STILL see almost $40k getting the unison loan compared to a conventional refi. Time value of money accruals destroy future wealth. I think these guys have figured that out. And BTW, I figured the new loan and amortization based upon a 3.25% interest rate on a new $280k loan for my calculations. I did NOT use an artificially high rate.

  15. The flyer I received in the mail is so deceptive and manipulative that I contacted my state rep (WA) who is passing the info along to the AG. The program is illegal in most states, I assume because it is predatory and anti-consumer.

    1. Every complaint I read about involves too much advertising or not being approved. I have not heard of one person who did this program and then complained. So…I doubt if its illegal. These guys seem pretty sharp ad are registered in all states to do business. It’s not a scam, just not everyone gets approved. And they send a lot of mailings. Both not illegal.

        1. Yes. That would be interesting. BTW I just got turned down due to my credit (700). But since there are no payments why is my credit score so important. And mine is not great but not poor either. Oh well.

  16. I don’t like the replies “get a loan, get a loan”. I have a credit score over 800, but do not want to get a loan, because, with my current mortgage payment, health care premiums, and all my monthly expenses (including the $2500 per quarter for estimated income tax), i am living paycheck to paycheck. I do not have the income to make a loan payment.

  17. Unison is a total scam. Ignoring all the issues about fees, fine print etc… Their basic terms suck. They are basically buying an option on 40% of the value of your home at a strike price of x% less than it is currently worth. An option that is in the money is worth the difference between the strike price and the current value plus the option value in the contract. (With a 30 year term the option value is huge!) However they are just paying you the difference between the strike and the current value and pocketing the option value! I imagine they are turning around and selling the option to an investor at a reasonable price and taking an immediate huge profit on that option value. This is a total scam taking advantage of people who don’t understand financial derivatives.

    1. Actually I think it’s worse than that. If your home value goes down below the strike price you still have to pay back the ‘premium’ that they paid you for the option. They can’t lose! The homeowner takes all the risk.

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