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).

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.

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 2.5% transaction fee on the amount loaned, plus applicable “third party expenses” such as closing and credit reporting charges.
  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.

14% 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 14% 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!

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

    1. Thanks for stopping by Dan!

      The title summarizes pretty much everything you need to know, the rest of the post is just to hopefully convince anyone who might disagree. 😉

      1. Great analysis! Just cancelled the Unison application after reading how predatory and expensive Unison will be. You are a lifesaver!

  1. I own a mobile home on a permanent foundation in a nice park in San Diego. My credit rating is around 725 and I have no mortgage on the home .I stoped by the bank I have been with for over 20 years to check out a home equity loan . They told me since I’m in a mobile home park there best rate would be approximately 9% . Do you know of a better option than Unision for Mobile home owners to get Equity out of there homes ?
    Thanks Rick

    1. Hey Rick,

      Unfortunately, I don’t have any suggestions for pulling equity out of your specific home. At 9%, it sounds like you might be better off with a personal loan if you need the money for something specific. With your credit score, you might be able to get a personal loan for less than that if you shop around a little bit.

  2. It does make sense for older homeowners with high equity in their house, high credit card debt and low on cash. For example: 70 years old man with $400,000.00 equity in $550,000.00 house and $100,000 in credit card debt…

    1. That doesn’t make sense. We’re comparing the relative costs of accessing home equity. My argument is that Unison is extremely expensive in many cases compared to the alternatives like a HELOC, a home equity loan, or refinancing.

      The only reason I think you brought age into it is because of the reduced timeline? That’s like saying older people shouldn’t care about interest rates because they might die before the loan is over. If they don’t want to leave any money to their heirs or have nothing they want to do with any money they have leftover, then sure, why no overpay for everything.

      On the other hand, I’d recommend the 70 year old make the best financial decision possible which probably means going with someone other than Unison for home equity access.

    2. It makes better financial sense to access the equity in your home with an FHA HECM loan. Debt can be paid off, equity can be taken out as cash against an equity line, or the loan can pay out as an annuity every month. Far better deal as rate is basically at FHA fair market.

  3. Consider a homeowner with substantial equity, on a fixed income, getting by but could really use an infusion of cash. Incurring additional debt to repay a new credit line would be more than burdensome, in fact they probably wouldn’t qualify due to debt to income problems.

    1. if qualifying for or repaying a HELOC would be burdensome, then I doubt Unison would approve the application for equity access using their program either. It’s not a sure thing and has the same sort of underwriting that any other type of home equity access would have.

      My argument is that if you need to access home equity for some reason, look at aternatives to Unison first. If everyone else denies you, then I suppose Unison may be worth a look, but I think it’s likely they would also deny you for the same reasons.

  4. It would seem to make sense to do the unison if the purpose isn’t a home equity loan bit if instead the purpose is to buy a house where you are just short of having the down payment or you want to give yourself some breathing room and keep some cash. It seems that it would make sense for persons purchasing and planning to stay for at least more than 3 years, especially, if it is a high cost area and they couldn’t otherwise purchase.

    1. If you run the numbers with modest amounts for home value growth, it ends up being an extremely expensive loan either way. If you can’t afford the common 20% down payment, then finding a bank that lets you put 5-10% down and pay PMI would probably come out ahead in most cases.

      For everything Unison offers, there is often a cheaper solution for the same problem. Unison is able to attract clients with the “No interest, no payments” statement, but that’s just hiding the fact that the loan is actually really expensive, you just pay it on the back end when you sell your house instead of along the way.

  5. Great article, and certainly gave points to consider from a long term perspective. What about the following shorter term scenario, in which we are comfortable with our current payment but are thinking of using proceeds of unison option to bring a jumbo loan to or under conforming limits, allowing a refinance at a far more favorable rate, and with concomitant lower monthly payments?

    1. For any time frame, you need to look at alternative options and price all of them out. With Unison it is trickier because you have to make an educated guess on approximate appreciation of the home over that time period. Based on the numbers I ran above and other examples I’ve seen, Unison came in behind the alternatives.

  6. I disagree with your analysis:
    First of all the home appreciation is a one time charge added to the loan amount only not the house value, It could be higher or lower than the average 35% they are mentioning, So if you borrow $100,000 you will pay about $135,000 after 30 years.
    Similarly if you take a $100,000 equity loan and pay 9% yearly on it, After 30 years you pay $189.664 on top of the $100,000 in interest which equals to 65.48% in true interest charged to the loan.
    So which way is better 35% or 65% ?

    1. I’m not sure where you got the 35% number, but that is much lower than how much a typical 30-year Unison loan will cost.

      If you borrow $100k, then Unison owns the rights to the appreciation on $400k of your property because of their 4:1 loan to equity ratio. Assuming your home’s value rises over time at 3% (lower than the national average), that $400k portion will be worth $942,626, or a gain of ~$542k!

      At the end of 30 years, you pay Unison back that $542k in appreciation plus the original $100k for a total of $642k which is WAY higher than the 9% example you laid out.

      1. No, You’re wrong. The Unison own a portion of the appreciation only, Say the 1/4 as you mentioned,If the house went from $400,000 to $800,000 they own the 1/4 of the appreciation which is $100,000 plus the original $100,000 = $200,000 but in most areas house don’t double in price, only expensive cities.

        1. That’s what I thought too! This article is wrong…It’s a way better deal if you don’t plan on selling right away!

        2. I’m sorry you’re having trouble following the math, but I’m very confident in my answer. I will try to elaborate.

          For every % that you borrow against your house, Unison will own that % times 4 when you eventually sell. So if you borrow 10% ($100k in your example), then Unison will get 40% of any appreciation on the house. If 10% of your house is $100k when you borrow, then the house is worth 1 million dollars on day one.

          At the end of 30 years, that 1 million dollar house (assuming a 3% average growth per year) will be worth ~$2.36 million dollars. That means the house will have grown $1.36 million dollars, and Unison will own 40% of it, or $544,000 (plus the $100k that you have to pay back). Just like before, this is equal to a much higher interest percentage than most other kinds of equity loans.

          As you can see, this is pretty much the same number I calculated above, I just went about it in a different way.

          1. I talked to Unison on the phone to verify their business model and pricing structure before I even wrote this article.

            If you think I misrepresented them, I would be happy to hear your case on how it actually does work. The math doesn’t lie.

          2. Yes I had an evaluation at their office and they explained to me everything, And yes they are entitled only to the appreciation of their share, If it is like you described they wouldn’t have a single customer.

            So you basically think that if I buy a car for $10k and I don’t have money to restore it I borrow $2k from you in condition that when I sell it you get your commission from the sale plus your original loan, So I sold the car for $20k only to find out that I only entitled to $10k and the other $10k is yours, How many people would sign up for this kind of deals if it was explained to them in advance?

            This entire article is useless and needs to be taken off, As of you if you are in the business domain I think you should go back to school to get some refreshing classes.

          3. Please review the math I posted again, everything I’ve posted is based off of them only taking a share of the appreciation. I never said they take the entire amount of appreciation on the house.

            For every percent you borrow from Unison, they own that percent times 4 of the appreciation when you finally sell. If you borrow 10% of your home’s value, they own 40% of the appreciation. If you borrow 15%, they own 60% of the appreciation. Etc.

            Honestly, I can’t tell if you’re trolling or not, but feel free to call Unison and point them to this article. I’ve shared the article with them previously and I’m pretty sure they would ask me to fix any mistakes if I misrepresented their offering. Maybe take your loan’s terms (if you did take a loan from Unison) to a neutral 3rd party and have them explain the math, I’m sure most hourly CPAs or CFPs would be happy to break it down for their regular fee.

      2. Your unison ratios are wrong. It’s unison 25 homeowner 75. If the house was worth 400,000 and went to 800,000, Unison only gets 25% of 400,00 which is 100,00 + 100,00 original loan. You need to do better research before writing about something you don’t know about.

        1. Hi Chris, I spoke to Unison to get the information above and my numbers are correct for their HomeOwner program. I’ve even had discussions about this exact post with their team, feel free to call them and confirm yourself.

  7. Thank you for this article. Nothing is for free in this world. You’re either paying it up front or in the back, but regardless you will be paying it.

  8. Noah,

    Please tell me if I’m missing something here. 2 things that appeal to me about this type of product. One, the money they lend me I pay straight into the mortgage as a balloon payment. I used some of the online calculators and since I recently bought a 30 year mortgage, I could avoid paying a huge amount of interest as well as pay off my home about 13 years early. Two, no monthly payments. That’s huge since I already have enough of those. Also, this isn’t compound interest right? This is only one time effective interest at the time of sale, for example. The 4:1 ratio is steep for sure though.

    Thanks in advance for your thoughts.

    1. Hi John,

      In your example, you’re simply borrowing from your future self to pay current debts. If the interest rate of your current 30 year mortgage is higher than the effective interest rate you’ll pay over the life of the Unison loan, then it could make sense. Unfortunately, the effective interest rate of a Unison loan (on average) is much higher than a traditional mortgage, so when you eventually pay them back you will end up much worse off financially.

      The Unison loan does work out to be compound interest in a way because values of homes tend to go up in a compound manner (3% growth per year versus $2k growth per year for example).

      Don’t be fooled by “no monthly payments” as an incentive. It sounds nice in the present because you don’t notice that you’re losing money, but you still have to pay it all back in the end.

      In summary, don’t take out a higher interest loan (Unison) against your house in order to pay down a lower interest loan (your mortgage).

      1. Thanks Noah. I’m definitely going to get a second opinion, but your comments made me bust out excel. I actually made my own mortgage calculator with functional balloon payment option. Without going into too much detail…Here are some things that I didn’t see in your post:

        Interest on loan avoided: 12.5 years of interest payments avoided. This is roughly 135 interest payments avoided. This is over 6 figures of savings.
        Compound interest on mortgage payments saved: I used a super conservative 1.5% return on investing my mortgage payments for those 12.5 years. This is roughly twice the interest savings. Roughly 3 x 12 x monthly payment. Let’s call the interest and saved payments as total savings.

        Now to your points: Unisom gets loan + (2.5% fee x loan amount which is almost negligible) + (future house value – present house value) * 4 * % equity used to derive loan amount (this one hurts). Let’s call all this the Unisom cut. This amounts to a first or second order equation here where the appreciation has the greatest affect on the outcome. So I made this the variable and looked at various values to see the behaviour of this variation.

        It turns out the break even point for me is right around my house appreciating at +75% of its current worth. But it’s not a true break even point in the sense that I would make $0 in the end. It’s the break even point where my total savings equals Unisom’s cut. I still keep my total savings and the money from the sale of the house after Unisom’s cut.

        Increasing house appreciation value, to me, is not quite like working on a contract expecting to be paid $100 and only making $50 which would make me angry. To me, the house is an asset and it increases fairly independently of what I do. It’s more of a factor of the houses around me and the neighborhood and the public schools, etc. I’m not going to get my pitchfork and torch just because my houses value didn’t go up as much as it could have.

        Basically, if I understand your point, you’re telling me that getting another loan with another monthly payment to make a balloon payment on my mortgage is better than reducing my mortgage by over a decade and pocketing 3x those mortgage payments while effectively freezing the market value of my house for 30 years.

        I just think I would prefer the latter.


        1. John,

          My suggestion would be option 3, don’t get a loan at all in order to pay down a different loan. That rarely makes sense and given the numbers you provided, I don’t think it makes sense in this situation. I feel like you’re trying to play a shell game with different loan products in order to save money, but the math just doesn’t seem to support it as a good option.

          You said the breakeven point is 75% appreciation over 30 years which is less than 2% appreciation per year (half of the average!). Anything above that and you will be losing money (assuming all of your math is correct). In my mind, it seems like a gamble that is heavily weighted towards Unison rather than yourself based on historical appreciation.

          Personally, I would just pay down the mortgage on it’s normal schedule given the information you provided. Opening a Unison loan to help pay down your mortgage seems like a losing bet all around.

  9. I’ve looked at Unison as an alternative to a reverse mortgage. Some homeowners can’t qualify for a refi or a HELOC or any other line of credit, so these are the options. “Hard money,” it too hard. But, the schematics of Unison’s brochure would need a highly qualified math expert to figure out. For those interested, I recommend that you read their length brochure and figure it out. Everyone I’ve talked to said it was a very good deal for Unison. But, the company also can lose. What to do? what to do? Suggestions?

    1. Hi Carolyn,

      My suggestion would be to compare Unison to ALL other ways you can access home equity, including reverse mortgages. Keep in mind you have to qualify for Unison as well, it’s not an open offer for anyone who wants it. I’m unsure if qualifying for Unison is easier or harder than traditional home equity access methods like HELOCs and refinances, but this probably depends on your location and several other factors.

      If you don’t feel comfortable with the math of your different options, seek out an unbiased source like an hourly CPA to compare the options and explain them to you.

      1. Hello. After a great deal of research, I conclude that both Unison and getting a Reverse Mortgage are horrible options. However, if one wants to keep his/her existing house and cannot qualify for a refi, credit line, or any other type of loan to access equity, and needs cash, then this is what’s available. I live in Orange County, CA and our properties are high and have held their value for the past decade. But, sooner or later, those values will dip. Just like my stock accounts. I qualify for Unison and for a RM, but couldn’t qualify for a refi or a credit line because I don’t work. Even my $650,000. equity and a Ph.D. doesn’t help. Ha ha. I’m trying to write a book! So you might look at your statements regarding qualifying. Unison has a section in their brochure that discusses the options for those with less than desirable “qualifying credentials.” I really
        don’t like the idea of the RM and the high premiums and closing costs. I got my RM broker to pay for $12,000. in closing cost, but the whole thing is kind of fishy. And, btw, I have three children and they are also idealists and non big money earners. All college graduates. So, I’d like them to get something. So if I took $100,000 out on a house worth $850,000. [assessed value], after 15 years with a 3% appreciation, what would the damage at that point? Thank you for this.

        1. Hi Carolyn,

          Probably not helpful for you, but for anyone else reading, this is why people recommend opening a HELOC or refinancing before leaving your job. Steady income is almost always the main qualifying criteria for these types of loans.

          As for your example, borrowing $100k against a $850k house would be ~12% which means Unison would own ~48% of the appreciation of the house. At a modest 3%/year appreciation for 15 years, the house will be worth $1.3 million, or growth of $450k. Unison would own 48% of that, so the loan would cost you $216k plus any fees charged up front.

  10. There’s another advantage – it’s impossible to default on this loan and lose your house. In that sense it’s almost like a combination loan + insurance policy, although a tremendously expensive one.

    Thanks for this post; I heard about Unison a while ago and was immediately suspicious about something so… creative, but I wasn’t sure how to think about it.

    1. Hey Ben. Thanks for this. I hadn’t thought about the default part. Also, as you occupy your house and make your payment, you are paying down your principal. Unison makes it very clear that this has nothing to do with their gain on the deal. So, that part is good compared to the horrible Reverse Mortgage idea. But, of course, the RM’s no house payment is a real plus. For me, that saves $19,200. in cash. But, each year on a RM, I’d have $10,000. to $11,000. minimum added to my loan. They also weren’t that clear about what happens to my $110,000. credit line if I die. I’m hoping it would go back into my equity since it was never used. Also, with Unison there are no age restrictions– and 18 yr. could do this if he/she had property. Would you go for the Unison deal. I’m over 62. Thx,

    2. Thanks for reading Ben, that’s a good point on not being able to default. If there’s no monthly payments, there are no payments to miss!

      As you mentioned though, it costs a lot of money to get that benefit.

  11. Noah. What do you think? Unison or Reverse Mortgage? The clock is ticking because the RM guidelines and lending qualifying and fees are changing on October 1st. YIKES!! Unison scheduler has called to arrange an appraiser and I was told they are third-party locals with no vested interest in Unison’s deal. Hmmm. So, I asked if it were the same as when my banks’ appraisers have come over the years for refis or for buying. Sleepless in Irvine. Thanks. Carolyn

    1. Hi Carolyn,

      I can’t answer that question without knowing all of the details of the reverse mortgage. I suggest hiring a CPA or CFP to go over the numbers if the two different options if you can’t decide. Choosing incorrectly could be very costly.

      1. Hello, Noah. I have consulted a CPA and CFP and a lawyer and they all tell me to sell, cash out, pay everything off, and start over with downsized place. But, I had already considered those options. It might be worth the hefty fees from Unison to be able to stay here and listen to my owls at night and to have my kids’ home available for the holidays and all. Thank you for your time and advice. Much appreciated. Always the idealist. Carolyn

  12. Hi Noah,

    What an extremely informative blog post. I just got a letter from Unison and am crunching the math. My house is worth $800,000. I dont need the money but I like cashflow (houses are not very liquid but I consider stocks very liquid).

    Lets assume:
    – I want to get $80,000 from them (10%), and keep it for 3 years exactly when I will sell my house.
    – the market goes up 3% per year so I will sell my house for $874,000 for a $74,000 gain.
    – I invest the $80k in a SPY stock getting 8% per year (so $101k after 3 years)

    My understanding is:
    – I would pay 2.5% of $80,000 up front = $2000
    – I would pay back 40% of my equity gain ($74k x 40%) = $29,600
    – I would keep the investment profit ($21k) and 60% equity gain $44,000
    – my net gain from (house up 3%, stocks up 8%) is $33,400

    Can you confirm these numbers or have I missed anything.

    Other scenarios for me to calculate are:

    1a) house price stays stagnant, but stocks stay at 8%
    1b) house price stays stagnant, stocks dont appreciate
    1c) house price stays stagnant but stocks go down 8% per year
    2a) house price goes down 3%, but stocks stay at 8%
    2b) house price goes down 3%, stocks dont appreciate
    2c) house price goes down 3% but stocks go down 8% per year
    3a) house price goes up 10%, but stocks stay at 8%
    3b) house price goes up 10%, stocks dont appreciate
    3c) house price goes up 10% but stocks go down 8% per year

    I do wonder how independent/rigged those appraisals will be if you dont sell your house or if you want to pay off the loan to convert your house to a rental. I also know if you want to sell within 3 years and the house has depreciated, then you are in trouble.

    Finally, do you know of other companies doing this? Do you know if any company is doing in on non-owner occupied investment properties (these are really difficult to release equity from right now).

    1. At a glance, it looks like you’re paying $31,600 ($2k fee + $29.6k appreciation) in order to potentially make $21k in the stock market? If your assumptions are correct, you lose $10k!

      Remember, if you don’t take out the loan at all, then you get to keep the full amount of the appreciation to yourself. In other words, you can make $74k for doing nothing or you can make $65k by taking out a loan and investing it in the volatile stock market. I know which one I would choose.

      What this really ends up telling us is that the effective rate of the Unison loan in your example is more than 8%! If you really want to invest your equity in the market, I would look at a more traditional HELOC or HEL which you can probably get for a fixed rate of ~5-6% right now. Personally, I wouldn’t take out a 5% loan in the hopes of getting 8% market gains, especially over a short period like 3 years, but that choice is yours.

      Finally, I do not know of any other companies that do loans like this.

    2. Paul, Based on your guessed equity after 3 years (9% which is $72k not $74k by the way) you owe Unison $80,000 + $7,200 which $7,200 is the 10% Unison’s share in equity.
      If your house value didn’t change after 3 years you only owe $80k
      If your house value dropped they are only loosing 10% of the depreciated value which it will be removed from the original loan ($80,000 – 10% of the depreciation).
      I worked with Unison but I left a couple of years ago
      I suggest you call them directly and ask, there is a lot of miss information online.

      1. David,

        Can you clarify this. I think:

        – I would pay back 40% of my equity gain ($74k x 40%) = $29,600

        You think:

        you owe Unison $80,000 + $7,200 which $7,200 is the 10% Unison’s share in equity.

        Am I misreading – I thought to borrow 10% you had to pay back 40% of the homes increase in value. If the home increased in value $72000 I think I have to give them 40% of that, but you seem to suggest I just give them 10% of that.

        As you worked there I appreciate your input on this matter.

        1. Where did you come up with 40% ?
          When you borrow say 10% of your home value that means Unison bought 10% of your home, Yes literally they own 10% of your house, therefore they are entitled to any equity on their part which is 10%, But if the market goes down they loose on their part as well (but they know what type of houses they invest in trust me), The only problem with this type of transaction is when the contract ends you will have to pay the whole amount in cash or they will have to sell the house, It is not for people who live from paycheck to paycheck or go buy a refrigerator or a mattress with financing, It is for people who are financially free to a certain extent.

          1. David, have you actually talked to Unison recently? It’s possible their business model has shifted since you left.

            Their standard offer is 4x ownership of the appreciation compared to how much you pull out in equity. For example, if you take out 10% of the equity in the home, they own 40% of any appreciation.

            Their website isn’t very clear on this exact ratio, so I ended up having to call and ask in order to write this post. Most of their website just uses vague terms like, “Unison will own a portion of the appreciation” without detailing exactly how much they will own.

          2. Afternoon Paul:

            In response to your question below:

            I have a specific question. If I get a shared investment from you of 10% of my current property value (lets say $800,000 value so an $80,000 investment), then in a few years I sell for $900,000 for a $100,000 gain. What is the amount of the gain I would need to pay back Unison. Is it the original investment amount ($80.000) plus 10% of the gain ($10,000) or do you take a large percentage of the gain?

            If Unison gave you a $80,000 investment payment in your property this would be for a share in the “future change in value” (FCV) of 40 %. So If your home sold for $900,000 that is a $100,000 (FCV) Unison would receive $40,000 of that (FCV) as well as our original investment of $ 80,000 for a total of $ 120,000. Would you like to set up a phone call to discuss the program further?


      2. David, you forgot that appreciation is compound. You can’t just multiply the number of years by the appreciation rate to get the total growth. Over 3 years the difference is relatively small, but over 30 years the difference can be huge.

        Anyway, the $74k number is correct, not $72k as you mention. This is key to understanding how much the loan costs over time.

        800,000 x 1.03^3 = 874,181.60 ~= $74k in appreciation

    1. This is a fairly good overview of their offerings, but once again glazes over the exact amount of the appreciation they would own. You’ll notice they are very careful to simply say “we share in the appreciation” instead of using specific ratios or percentages.

      I wouldn’t go as far to say they are lying by omission, but I highly doubt most people taking advantage of their offers truly understand how much it could cost them over time.

  13. Hi Noah,
    Here is my situation: I bought my 3 bed/2 ba house in a run-down neighborhood a few years ago for $170,000, then a couple years later the appraisal value went down to below $100K in the crash, and now is back up, probably worth a bit more than $200K as prices go up in the neighborhood (a LOT slower than the nicer surrounding neighborhoods). I’ve paid down my loan to about $120K. But I have no intention of moving for a long time, since it’s close to work, and especially since if I were to sell my place, I would not be able to afford any nice properties anywhere in the state. And my mortgage payments are relatively low, I for the most part like my neighbors, my street is safe and nice albeit just a little trashier down the street than you find in other suburban neighborhoods, and I have a nice property, relatively small (for a 3-bedroom) house but on a big property. I have a 3.99% interest rate and 15 year loan, and should have it paid off in about 10 year or so, when I’m 55. Because of the general ‘hood I live in, value goes up very slowly. I don’t think this will ever be a million dollar property. 🙂 Anyway, while I have a decent job and I can pay the basic bills and mortgage just fine now, I don’t have any $$ left for doing upgrades or remodeling, and with 3 adults (BF & roomie) living in the house (no kids), it would be awesome to build on another bathroom, add some AC to the room addition, and fix a few cosmetic things up. I don’t want to do an equity loan because if I’m understanding right, I would need to pay that back as a I go, wouldn’t that raise my total monthly payment, mortgage plus loan? I can’t really afford right now to pay more each month. But the thing is, I don’t really have to worry about paying if off later most likely. My 70 year old parents are well off and have a house and 2 condos plus some investments — nothing liquid right now, so they won’t/can’t loan me anything right now, but I’m in the will so I’ll likely easily be able to pay off any borrowed amount if the help is needed in 30 years. So I’m thinking borrowing against the future would be ok in case, ok, yeah, maybe not the best investment, but then I could fix up the place to make it very comfortable and satisfying now for us. I’m not worried about having it to leave to kids I have none and am now too old to have them. In 30 years, when I’m 75, I’d sell the place, give Unison their half, sell the other properties, split everything with my sister, and I think I’d have plenty left to buy myself a retirement condo. Does that make any sense? I get that it might not be a good investment but I’m not looking for a good investment, I’m looking for ways to use the equity on my house to get some cash to pay for upgrades to make it a better place, to make it some place I’ll be happy living in for the next 30 years; ways that I won’t mean I have to add time to my mortgage loan and pay it for more years (I don’t want to have to worry about whether I keep my job when I am in my 60s, really want to have it paid off by 55); ways that won’t increase my monthly payment. A loan that will get me to about age 75 without extending my mortgage or raise my monthly payments, that I can pay off just by selling my house. Seems like even if values go way up, I’d still walk away with a good amount of cash too and it seems like a low risk investment? less than if I just went without doing the home renovations but I don’t want to scrimp and save more than I am now and be unhappy with my home for the next 20 years. My perception is that this might not be the best investment but it’ll work and be low risk? Is there a better kind of low risk loan for this circumstance, to get the home improvements done?

    1. To what do you refer when you say “behavioral finance lesson”?
      I have never felt so “out of my depth “ as I have reading this blog.
      I have a “manufactured home” on a permanent foundation foundation on a half acre near Sacramento, CA. Recently appraised at $350k I owe $185k. I received an offer from U for $60k. I am retired and 65 years old with no heirs. I was considering a Reverse Mtg because I would no longer have to pay my $1350 mtg payment. This would make things easier on a monthly basis.
      If I don’t really care what happens to things when I am gone, which is better?

      1. The idea of behavioral finance is that humans often make illogical decisions about finances because of emotional/psychological biases we all have.

        An example: Imagine there was a concert or sports game that you really wanted to go to. Tickets were priced at $25 face value, but they’re sold out and the cheapest you can find from scalpers is $1,000. If you did not already have a ticket, would you be willing to pay $1,000? Most people would say no — the price is ridiculous. On the other hand, if you had managed to buy a ticket for $25, would you sell it now for $1,000? Again most people would say no — they got a great value!

        But logically the two situations are identical: you either have $1,000 in your pocket or you get to see the concert/sports game. This is called loss aversion — most people go to irrational lengths to avoid losing what they currently have.

        Reading the comments above, several people are arguing the usurious interest rates that Unison works out to are justified simply because they don’t have to make any payments — they’re averse to “losing” the money in their bank accounts in the form of making monthly payments.

        Moving to you, with the caveat that I am not a financial adviser or an expert in any of this, your situation sounds unusual because you do not seem to care about the residual value of your home/estate when you’re gone (b/c you have no heirs – which is totally fine – not making any judgments). If that’s the case, then I would lean towards whatever makes your life easiest. To that end, $60K [the amount Unison offered] is enough to cover just under 4 years of $1,350/mo mortgage payments, which I would speculate is probably not as long as you’d like. So although I would seek a professional financial adviser’s counsel, it seems as though a reverse mortgage might make sense.

  14. Basically, regardless of the loan amount or Unison isn’t investing in a % of the equity borrowed. Unison is wanting ALL of the equity at 40% when you sell the house?

    1. Unison gets a portion of the appreciation of the house when you sell. That portion is determined by the amount of equity borrowed as a percentage of the home’s value, then multiplied by 4.

      If you borrow 5% of your home’s value, Unison will own 20% (5% x 4) of the appreciation when you sell. If your home is worth $100k in this example when you borrow (so you’re borrowing $5k), then you eventually sell the home for $150k ($50k in appreciation), Unison will own the original $5k + $10k ($50k appreciation x 20%).

      This is all regardless of how much equity you have in the home at the time of sale.

      1. I would check their site again. Everything I see for both new home purchases and equity cash changes the percent they own of the appreciation based on how much cash you want. There is no 4x rule. Their stated average is 35% and find that in articles going back to Jan 2017. In just playing with their calculator, a down payment of $140k, with $70k coming from unison sits at 35%. $100k down, with 50k from unison is 25%. The home equity side has higher percentages, logically, but it still varies by loan amount and is not flat. This isn’t an endorsement for unison, just what I’ve seen from researching their site. I don’t see the 4x structure posted anywhere and can’t find it referenced by other reviewers.

        People should also keep in mind that buying less overall and putting more of your own money down, but taking a small percent from unison could still be a reasonable option to get you over the finish line. I am imagining unison is more popular in the high-cost housing markets, like where I live in southern California, where a heck of a lot of people are looking at jumbo loans just to get into a reasonable space. They bay area is even worse. If you’ve got $100k, but need $40k to get that 20% on your $700k home purchase, the 20% appreciation ownership from unison might just make sense. I haven’t fully eked out the math on that, so I can’t say for sure. I’ll play around with it some more.

        The last thing I’ll point out is while 10% down and PMI might be cheaper over 30 years, it is also possible the person may not be able to afford the mortgage payment with PMI. Two thoughts there – 1) Your best decision might be to spend a bit more time saving and look to purchase in some years versus now and 2) The added interest that equates to what you’ll need to pay to unison may just be worth it to you to get in the house now. People talk all day about how leases are not the smart financial thing to do, but they do help people get into more car than they might otherwise be able to and that might just be what is important to them.

  15. Look for some Home Equity. Got a Unison Offer in the mail. Found your article. Won’t be considering it now. Thank you for the great explanation.

  16. Well you said they get 40% of the price change does that also apply to the negative price change? ie loss in value? I doubt the case since it will open up a door to exploitations people will short sell their houses and screw them really bad, but I wanna double check nevertheless is that’s actually their contract. thanks

    1. Hey Gus,

      Yes, Unison will also share in any deprecation of the house, but only within their strict rules. The primary one being you have to have held the loan for at least 3 years, but they also include clauses that ensure the depreciation isn’t a result of poor maintenance.

      A short sale has to do with the value of the home versus the amount owed on the mortgage, so that would almost never come into play with a Unison loan. The home would have to drop >20% net after 3+ years for it to possibly come into play.

  17. Hello–

    Wondering if there are any tax implications when the proceeds are obtained given there is no interest obligation on the funds.? Are the proceeds from the “loan” considered a loan for tax purposes or ordinary income which would be taxed?

    Elderly relatives with $700k+ in equity in home/no mortgage and very limited income/savings have considered a HELOC (low proceeds which would only last a few years and they would struggle with the monthly I/O payments in the beginning of the loan let alone the P&I in year 11 and beyond) and a reverse mortgage (5X the proceeds of a HELOC but $20k in closing costs). Aside from downsizing — which they say isn’t a consideration — what are their options? They are focused on preserving as much of the current equity as they can (and are not aren’t betting on significant appreciation), but they also need $$ now and know that all of these options will eat away at some of that in-place equity.

    1. I would consult with a tax professional, but it is my understanding that the loan amount granted is not taxable. Unison’s website suggests the same, but also advises to consult with a tax professional.

  18. Noah,
    Do I owe the IRS any capital gain tax on the amount that is paid to the Unison ?
    Is the amount owed to Unison calculated after deducting the realtor fees and other sale expenses ??

    Am I wrong in considering these factors for evaluating the worthiness of this program from Unison ?
    Sorry if I have missed anything here.


    V V

    1. I would consult with a tax professional, but it is my understanding that the loan amount granted is not taxable. Unison’s website suggests the same, but also advises to consult with a tax professional.

  19. Thanks for this insightful article Noah. I still think Unison may be right for me but I need your opinion .
    I am 52 yrs old. Had a foreclosure 5 years ago (bad decision to get a loan I cannot afford right before the market collapsed). I have worked hard on repairing my credit ever since. Lowest score is 680 and highest is 720. I have been approved for an FHA loan, I have to wait 2 more years for a conventional loan. I am qualified for a purchase price of $680000 in Orange County California or $429000 in Riverside County same state, due FHA limits . I can comfortable afford the payment for the $680000 and the $400000 equals to my current rent and more than manageable. I have saved about $50000 is the past 5yrs that can go towards the down payment. I want to buy a home and stay there as long as possible (at least until I retire in 17 years). Desirable homes go for $500000 in Riverside, so the Unison matching can get me in my desirable home. My thinking: Uninson is the only way I can even start to build equity right away instead of waiting 2 years. What would be the cost of waiting 2 years?

    1. Hello Missy Yen,

      I am not currently doing consultations, I suggest contacting a financial planner or similar to work out your best options.

  20. Hello Noah,
    Thank you for your detailed posts. I’m considering Unison and other HELOC options. My sole reason for obtaining this $ is to remodel my home. The ad from Unison mentions a “Remodeling Adjustment, which allocates 100 percent of the value attributable to your home improvement project to you.”
    My interpretation of this is, if the homes value goes up 50K after the remodel, I keep this entire amount. Unison does not get a percent of that; and it is carved out of the final repayment amount to Unison.
    Do I have that right? Any other details or thoughts on this remodeling adjustment?

    BTW, Unison is not my first choice, I plan on approaching my credit union first.

    Thanks again for your feedback.

    1. Your understanding matches mine: Improvements made to the home that increase its value would be subtracted out of any appreciation before Unison got its cut.

      In practice, I’m not sure how they validate the increase due to a remodel. My best guess would be that they would require an appraisal both before and after the remodel to accurately determine the value of the remodel. That’s simply a guess, so I would contact Unison directly if you want a real answer with more details.

      1. Who chooses and pays the appraiser(s)? If it’s Unison’s appraiser (or paid by Unison) then I would be concerned that the initial appraisal would be a low ball to make any eventual appreciation higher. And, any remodel appraisals could also be written to minimize their effect on appreciation.

  21. Noah I might be one of those who can benefit from this type of loan. I have a decently appraised property that I held on with all my savings, when the subprime disaster hit me in 2006. I have a wonderful first mortgage and a decent second. The problem is that unsecured debt and lower than expected income over the years, increased my burden almost to desperation. I tried to refinance the second, but high debt ratio and mediocre credit failed my endeavors. I have no more options. That’s where Unison comes in. My property won’t gain any equity going forward due to new tax regulations and interest rate increases. It may stay or even drop about 10%. IYO could Unison be my Golden Goose?

    1. Given the situation you described, it doesn’t seem likely that Unison will approve you for their product. You mention your property not gaining any equity which is different from the home’s value. Unison owns a portion of the home value appreciation, it doesn’t matter how much equity you personally have in the place.

      As always, it just comes down the math. Unison may be able to help if you have a good plan for what you will do with the loan itself.

  22. Explain to me in numbers again why you stated the below:

    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:

    Cash-out Refinance
    Home Equity Loan
    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!

    Given that many in this country have low credit score and they will get hit hard with high interest rate fees with those three options…

  23. Fascinating conversation, thanks to all of you. Recent tax overhaul will surely add another few layers to peel through once the devilish details shake out.

  24. After doing a lot of due diligence, I must say that Unison makes a lot of sense for a person like me. My wife and I currently live in the bay area making over 250k. Unfortunately, we haven’t established the credit needed to great interest. In addition, we’re having a tough time being able to get the 20% down needed for no pmi when we’re paying $3500 for rent.

    The way I see it if we were to max out our credit cards to help pay the 20% down of our home, I don’t think that’s wise as the percentage of a typical credit card at 14.99% compounds yearly.

    Secondly, I must say that unison is willing to take a risk in the investment of your home. and for them to take 35% of the appreciation is more than fair. Looking as if it was a business, when investing in a company, for me to provide 50% of the initial investment means I should get 50% of your house, but with Unison they only take 35% of your appreciation and 10% of your initial value.

    Obviously they don’t deal with the interest that you’re paying because essentially you’re living in that house and you also are able to use that as a tax deductible. But in any case, I believe for a millennial like me that is making a decent living but unable to save to pay for downpayment, would work well for my situation.

  25. Someone asked if there are other companies working the model of Unison — I found Patch, which offers equity access on a 10-yr timeline instead of 30yr (not clear if they have a homebuyers program also).
    >> Patchhomes.com
    @Noah your options for accessing equity do not address the factor of cash flow, particularly in a down market. Had this been available in the last housing crash wouldn’t thousands of people still be in their houses with a chance to ride out the downturn? Wouldn’t a HELOC have pushed them to the street even faster…?
    As for the calculations and discussions about interest comparisons of HELOC, HEL and Unison et al., I’m inclined to take a step back and ask about fundamental beliefs in the value of homeownership as an investment. I bought my house in SF Bay area in 2010 for $590,00 and it’s now worth $2 million. Had I bought my house in 2007 the numbers would have been reversed. So am I brilliant? Heck no — even with my “gain” I am sober enough to realize it’s all “funny money”, AND there will likely be another market correction soon.

    SOOO, what difference does it really make if this Unison money is more expensive 30 years down the road? The alternatives of HELOC and HEL and Personal Loans could be triggers for cash flow disaster in a down market. Aren’t we stepping over dollars to pick up dimes with the traditional products???
    Lastly, just for fun take a look at the sister website for Unison — this is where to go if you want to invest in the real estate market, as in individual or institution (= the source of funds for the loans on Unison). https://www.realtyshares.com/ (check the video on the home page and also the blog post 12/21)
    > So one could take a loan out with Unison and reinvest it in RealtyShares and get monthly or quarterly dividends. I’d love to see how those numbers crunch out….. LOL.

  26. Referring back to James’ comments beginning 8/26/2017 using a $100,000 Unison advance on a property appraised at $400,000; Unison contract stipulates Unison to receive 25% of increase in property value. Said property is projected to increase to $800,000 dollars from the contract inception date to the payoff date. Assuming the homeowner sells the property for $800,000 to pay off Unison:

    Unison receives $100,000 (25%) of increase in property value, and $100,000 for their original investment: total $200,000.
    Homeowner receives $600,000 ($800,000 -$200,000 Unison share). Homeowner purchases awesome home in Florida for $400,000, lives large on remaining $200,000 for a few months before realizing he hates the heat, humidity, and mosquitoes.

    Or, using your recalculation Noah:

    Same scenario as above, with the exception that homeowner’s property has initial value of $1,000,000, soars to about $2,360,000 at payoff date.:

    Unison receives $340,000 (25%) of increase in property value, and $100,000 for their original investment: total $440,000. Homeowner receives $1,920,000 ($2,360,000 – $440,00000 Unison share). Homeowner purchases shanty in San Diego for $1,000,000, lives hand to mouth after real estate taxes, attorney fees, psychiatric care reduce remaining largesse of $920,000. Realizing he can’t afford to stay, homeowner moves in with his Mom in Green Bay.

    I appreciate your sincerity Noah, but voodoo math is just that. The above numbers, at least, represent the cash flows based on Unison’s business model. James and Camilla got it right.

  27. Just spoke with a Unison rep as of 02/22/018. The total transaction cost is 3.9% of the amount loaned. Unison share of the gain is between 20 to 70 percent. In my case for a $78000 loan on a home worth $450000, Unison share of the gain would be 70%. Unison would only share in the home loss of value if it’s at the end of the 30 years agreement and not before.

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