Unison Finance: Bridging the Home Ownership Gap

Unison Finance is a San Francisco-based company that offers a unique alternative to traditional mortgages, aiming to make homeownership more accessible and sustainable. Instead of providing a loan, Unison enters into a co-investment agreement with homeowners, sharing in the appreciation (or depreciation) of the home’s value.

How Unison Works

Unison typically provides up to 17.5% of the home’s purchase price in exchange for a share of the future profit (or loss) when the home is sold. This upfront cash infusion can be used to increase a down payment, eliminate private mortgage insurance (PMI), or reduce the overall mortgage amount, leading to lower monthly payments. Crucially, Unison does not charge interest or monthly payments, and there’s no lien placed on the property.

The agreement typically lasts for up to 30 years, although homeowners have the option to settle the agreement earlier by buying out Unison’s share. The buyout price is determined by an independent appraisal, reflecting the home’s current market value. This means that if the home appreciates in value, Unison receives a percentage of the profit based on their initial investment. Conversely, if the home depreciates, Unison shares in the loss.

Benefits for Homeowners

• Increased Affordability: By augmenting the down payment, Unison can help buyers qualify for larger mortgages or lower interest rates.
• Reduced Monthly Payments: Less debt translates directly into lower monthly mortgage payments, freeing up cash flow.
• Elimination of PMI: A larger down payment can often eliminate the need for PMI, saving homeowners hundreds of dollars each month.
• No Interest or Monthly Payments to Unison: This provides financial flexibility and peace of mind.
• Shared Risk: Unison shares in both the gains and losses associated with the home’s value.

Considerations

While Unison offers compelling benefits, there are important considerations. Homeowners relinquish a portion of their potential future profits. If the home appreciates significantly, Unison’s share of the gain could be substantial. Additionally, the complexity of the agreement requires careful review. It’s crucial to understand the terms and conditions, including the buyout process and how the shared appreciation is calculated.

Furthermore, not all properties qualify for Unison’s co-investment program. They have specific criteria regarding the location, condition, and type of property. Borrowers must also meet certain credit and financial requirements.

Conclusion

Unison Finance presents an innovative approach to homeownership, offering a potential solution for those struggling to afford a down payment or seeking to reduce their monthly mortgage obligations. However, potential homeowners should carefully weigh the benefits against the potential drawbacks, considering their individual financial circumstances and long-term goals, before entering into a co-investment agreement.