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Unison Review: Better Than a HELOC?

Unison Home Equity Review
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Thinking about leveraging your home equity for extra cash?

You no longer have to borrow against it with a home equity loan or line of credit (HELOC) and make regular payments to a lender.

Thanks to home equity sharing companies, you can access cash using your home equity without adding a monthly payment.

One of these companies is Unison, and in this review we’ll go over how it works and how it stacks up against the competition.

Unison Basics: How it Works

Unison gives you money today in exchange for a share of your home’s future value. In other words, they invest in your home hoping it will go up in value. 

This is not a home equity loan, a HELOC, or any other debt product; you don’t have to make monthly payments, and there are no interest charges.

Instead, you pay the company an amount equal to its initial co-investment plus their share of your home’s appreciation when the term expires (or when you sell your home). You can also buy out the company’s stake in your home after five years.

Unison Costs and Fees

When you sell your home or your term ends, you’ll owe Unison its original investment amount plus its share of your home’s change in value.

To best explain how this works, there are some definitions we need to cover that are specific to Unison. 

  • Original Appraised Value: the estimate of your home’s value today as determined by a third-party appraiser.
  • Original Agreed Value: your appraised value at the start of the agreement minus a 2.5% risk adjustment fee (which we’ll discuss later in the article). 
  • Ending Agreed Value: the value that’s agreed upon at the end of your Unison contract, based on the sale price or a third-party appraisal.
  • Co-Investment: the amount of cash you receive from Unison. 
  • Investor Percentage: the portion of your home’s future change in value that is paid to Unison when the agreement ends. (This is usually determined by multiplying the percentage of your home’s appraised value by four.)

Now, let’s look at an example. 

Say that an appraisal finds your home to be worth $500,000, and you’re looking for a co-investment with Unison of $50,000. 

Original Appraised Value:$500,000
Percentage of your home’s value you receive upfront:10%
Co-investment:$50,000

In this example, you get $50,000 in cash from Unison. There are no monthly payments and no interest charges on this $50,000. 

At the start of the agreement, you also know your Original Agreed Value (OAV). 

Original Agreed Value = Appraised Value – 2.5%

This OAV doesn’t impact the amount you get from Unison upfront, but it will determine how much you pay them when the agreement ends. (More on this below.) 

You also know your Investor Percentage upfront, which is the portion of your home’s change in value you’ll owe Unison at the end of your agreement. 

This varies based on the co-investment amount you take, and it can usually be determined by multiplying the percentage of your home’s appraised value you receive today by four. The maximum Investor Percentage 70%.

In this example, since you’re taking 10% of the home’s appraised value today, the Investor Percentage will likely be 40%. So that’s the figure we’ll use in our example.

So to sum up what we know at the beginning of the agreement:

Original Appraised Value:$500,000
Percentage of your home’s value you receive upfront:10%
Co-investment:$50,000
Original Agreed Vale (OAV):$487,500
Investor Percentage:40%

Let’s move on to the end of the agreement. 

Imagine you sell your home 10 years later without any change in value. 

What you’ll owe Unison is 40% of the appreciated value of your home, based on your OAV.

Original Appraised Value:$487,500
Ending Agreed Value:$500,000
Change in Value:$12,500
Amount you owe Unison (original co-investment amount + 40% of change in value):$55,000

Note that Unison charges a 3% transaction fee — deducted from your initial proceeds — upon closing the deal. If you move forward with Unison, you’re also responsible for third-party fees, such as appraisals and settlement fees.

Depreciation

You may owe Unison less than the amount of original co-investment if your home depreciates in value.

However, note that if you buy Unison out early, or if you sell your home within five years of closing on the deal, Unison will not share any losses on the home.

Otherwise, you may pay Unison less than what they gave you.

Going back to the previous example, imagine you own your home for six years before selling. When you sell, your home’s value has dropped to $450,000. 

Keeping in mind that the Risk Adjusted Value of your home was $487,500, Unison’s share of the depreciation would be -$15,000 (40% of -$37,500). Subtract this from Unison’s $50,000 initial investment to arrive at $35,000 — the amount you’d owe Unison.

Co-investment received from Unison:$50,000
Original Agreed Value:$487,500
Ending Agreed Value:$450,000
Change in value:-$37,500
Investor Percentage (40%):-$15,000
Amount you owe Unison (original co-investment amount + 40% of change in value):$35,000

Of course, failure to maintain the property could lead to a significant decrease in value. Unison accounts for this possibility, which we’ll cover in a moment.

But first, let’s look at what happens when your home appreciates in value. Say that at the end of six years, you find your home is worth $600,000. 

Co-investment received from Unison:$50,000
Original Agreed Value:$487,500
Ending Agreed Value:$600,000
Change in value:$112,500
Investor Percentage (40%):$45,000
Amount you owe Unison (original co-investment amount + 40% of change in value):$95,000

Upkeep

If you don’t properly maintain the home, Unison will not share in property value loss attributable to the poor upkeep.

Unison protects itself against this eventuality by applying a Deferred Maintenance Adjustment when calculating final proceeds. This adjustment reduces the loss Unison shares with you, thus increasing the amount you owe. 

Unison uses one or more appraisals and repair estimates from third-party providers to determine how much property value loss was due to improper upkeep.

If you and Unison can’t agree on an amount in good faith, you have the option of arbitration.

Renovations

Unison offers a Remodeling Adjustment to exempt increases in home value attributable to remodeling from the final settlement calculation.

You must hire licensed contractors and document the project to qualify for the Remodeling Adjustment. A third-party appraiser will determine your home’s new value and calculate how much increase is due to renovations.

For example, if you remodel your home, increasing its value by $75,000, that $75,000 is then deducted from your final appraised value to determine your home’s Ending Agreed Value.

This policy allows you to use your proceeds for renovations and boost your home’s value without owing more. Note that you are not eligible for a Remodeling Adjustment until after the third anniversary of your Unison agreement.

Application and Eligibility

Unison requires that your mid-FICO credit score (i.e., the middle of your three FICO scores) be at least 620. Minimum debt-to-income (DTI) and loan-to-value (LTV) ratios vary depending on credit score. Unison’s maximum loan-to-value ratio is 75% with an excellent credit score. A strong score can also help you maximize approval chances and terms despite having a higher debt-to-income ratio.

At the time of writing, Unison is available in the following states: 

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

How Much You Can Get

Unison offers co-investments up to 17.5% of your home’s value, with a maximum dollar figure of $500,000. That’s the highest dollar figure of any of the big home equity sharing companies, but the percentage is actually lower, meaning that your home needs to be worth more in order to access Unison’s maximum co-investment. Unison’s minimum co-investment amount is $30,000, so your home must be worth at least $172,000 to qualify.

Consequently, Unison looks to be a good choice for those with more valuable homes.

Of course, exact amounts depend on your property value, equity in the property, credit score and DTI ratio.

To determine your home’s value, Unison uses a third-party appraiser. This is the Appraised Value. From there, Unison subtracts the 2.5% risk adjustment from your Appraised Value to arrive at the Original Agreed Value.

Unison considers your home’s value to be the Original Agreed Value for purposes of calculating the change in value over time that Unison shares in.

Unison Pros and Cons

Here are some benefits and drawbacks to working with Unison.

Pros:

  • 30-year terms. Unison’s 30-year term gives you ample time to use your co-investment before needing to settle up with Unison. It’s longer than Hometap’s and Noah’s 10-year terms. 
  • Maximum cash amount. Unison’s $500,000 maximum cash amount is much higher than its competitors’ maximums.

Cons:

  • Risk adjustment. Unison uses a 2.5% risk adjustment, which lowers the starting value of your home and increases your cost. Still, it’s much lower than the risk adjustment of its competitor Point, which can be as high as 25%.
  • Percentage of home value obtainable. Unison offers co-investments up to $500,000, but the actual amount you can get is capped at 17.5% of your home’s value — a lower percentage than its competitors.
  • Credit score. Unison’s 620 credit score minimum may exclude interested homeowners whose credit may already be too low for traditional home lending options.

Unison Competitors and Alternatives

Unison’s three primary competitors are Hometap, Noah and Point. Now that we’ve covered Unison in-depth, let’s compare it against these companies. You can also learn more in our roundup of the best home equity sharing companies.

  • Hometap. Unlike Unison and the other competitors, Hometap takes a share of your home’s appraised value at the end of the term or when you sell, instead of the original investment plus appreciation. Hometap requires a 600 credit score and offers 10-year terms and a max loan-to-value ratio of 75%. You can take out up to 30% of your home’s value for a max dollar figure of $300,000. Hometap applies no risk adjustment.
  • Noah. Noah’s term length is only 10 years, and it requires a minimum property value of $300,000. You can obtain up to $350,000 (less than Unison’s $500,000), but Noah lets you borrow up to 20% of your home’s value, compared to Unison’s 17.5%. Noah’s maximum loan-to-value requirement is 85%.
  • Point. Like Unison, Point offers 30-year terms. Servicing fees range from 3% to 5%. Point will hand out up to $500,000, depending on your equity and home value. Point’s 20% to 25% risk adjustment is much larger than Unison’s 2.5%.

Key Questions About Unison

Can you use Unison with vacation homes and/or rental properties?

Unison generally invests in owner-occupied homes. For a home to qualify as owner-occupied, you must live in your home for 180 days in a 365-day period without being away from your home for more than 60 consecutive days. Unison does invest in vacation homes and rental properties in some cases. They ask that you plug in your address to see if the property qualifies.

What happens if you get behind on your mortgage?

Unison may be able to extend “Protective Advances” to you, which are funds they provide on your behalf if the value of your home is at risk due to non-payment of a housing-related obligation (e.g., taxes or mortgage payment).

In situations like this, you are responsible for repaying Unison for the amount of any Protective Advance. Unison also charges interest on advances until they are repaid, which is the only time Unison charges interest.

Unison may also be able to offer an “Orderly Sale,” which prevents your home from being “distressed” and entering foreclosure, protecting your credit and your home’s value

Our Take: Is Unison a Good Deal?

Is Unison right for you?

Our stance is that home equity sharing companies are ideal for those who can’t obtain a traditional home equity loan or HELOC. With interest rates being low, and these loans having a fixed-rate, traditional lending methods are best suited for those who qualify. 

Home equity sharing agreements make sense for those who have a large amount of equity in their home, and would benefit substantially from the cash they’d receive today. For example, many people turn to home equity sharing companies to pay off substantial credit card debt or to fund a remodeling project. 

Unison in particular is a decent option for homeowners in expensive real estate markets, as well as for those whose property values are high, given its low maximum co-investment percentage (17.5%) paired with its high maximum dollar amount ($500,000).

It’s also suitable if you’re looking to renovate your home. Unlike some competitors, Unison will exempt any added value that results from renovations.

Regardless, it’s best to compare each home equity sharing company against each other, as well as home equity sharing as a whole against traditional home lending. 

We’ve written reviews on Unison’s three competitors — Hometap, Point and Noah — so check those articles out to see where they stand.

Visit Unison.com

R.J. Weiss
R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

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