Unison Mortgage down payment match (too good to be true?)

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I am in market to buy a house but right now I think I can put down 10%.  I see online that UNISON says they will match your down payment.  My question is what is in it for them?  Sounds too good to be true.  Are they reliable? Anyone dealt with them before?

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I don't understand their calculation In the 3 examples shown https://www.unison.com/how-it-works/  
While the property ga... (more)

calvin888 (May. 03, 2017 @ 10:26a) |

If you only withdraw the bond portion of your portfolio, it doesn't matter.  You are just buying a bond where you know t... (more)

elektronic (May. 03, 2017 @ 10:48a) |

Not following you here.

Assuming a 20% down payment, 10% from you and 10% from Unison.

Purchase price=X
Sale price=Y

Unison ... (more)

cestmoi123 (May. 03, 2017 @ 11:02a) |

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They get their money back plus a portion of the gains when you sell. They're taking an equity stake in the home.

https://www.unison.com/homebuyer/

"Our share of the change in value is typically 35%"

They have a website that explains all of this. https://www.unison.com/homebuyer/

From that website:
We provide down payment funds that you can use for up to 30 years with no interest charges or monthly payments.  In exchange we share in the change in value of your home – up or down – when you decide to sell.* Our share of the change in value is typically 35%. If your home’s value increases, we both profit as partners.  If your home’s value decreases, we also typically take a portion of the loss. It is a true partnership – we win and lose together.

Edit: jerosen types faster than me.

I'd be curious if their "match" passes conventional underwriting.

frodobaggins said:   I am in market to buy a house but right now I think I can put down 10%.  I see online that UNISON says they will match your down payment.  My question is what is in it for them?  Sounds too good to be true.  Are they reliable? Anyone dealt with them before?

You'd really need to do your due diligence on this. I'd be extremely wary.

Wouldn't it be better to do a 10% down and a second mortgage for the other 10%? Or is that a thing of the past? I did that to avoid PMI but a long time ago... in a galaxy far far away...

so for a deposit of say 10% (So you get to the 20) you get someone who's on your title as a holder of the house and can theoretically sell or rent (depends on the deed setup) and gets 35% of all increased value plus their 10%. Wow I thought that regulation stopped things like this.

This is absurd. The bank is pulling a fast one on it's customers, but this could come back to haunt them in many situations.
Who is likely to take better care of their house? Someone that owns it 100% or someone that doesn't? This essentially takes away any motivation to perform any repair, upkeep, or improvement that isn't absolutely necessary.


Edit: They have it in the agreement that if you don't maintain your home properly, they will charge you for the resulting decline you caused them.


*Assuming there isn't some allowance for these things to be included to your shares.

Interesting. Would they match for investment properties as well ?

forbin4040 said:   so for a deposit of say 10% (So you get to the 20) you get someone who's on your title as a holder of the house and can theoretically sell or rent (depends on the deed setup) and gets 35% of all increased value plus their 10%. Wow I thought that regulation stopped things like this.
 (FYI:  They are a lien-holder.  They are not on the title as an owner.)

Wow, just wow.  I couldn't agree more.  They offer 10% to get 35%?  Talk about leverage.  Plus reading their Q&A and it just keeps getting better:

1.  They aren't the mortgage underwriter.  You have to work with one of their "Partner Lenders."  Any bets on how great of deals these partner lenders offer?  Or the amount of "kickbacks" ???  (~Commissions.)
2.   "the Deferred Maintenance Adjustment allocates all of the loss in value due to improper maintenance to you, so that Unison does not share in it." -  So you either pay maintenance and repairs to keep the house in pristine condition - while they pocket 35% of your gains while paying $0 on repairs.  Or they screw you at the end for not doing the repairs properly.  Either way they reap huge gains without paying any of the related expenses.
3. Home Equity loans / lines are capped at 80%.  You are giving up the right to take additional home equity out.  (If you pay down your loan, you can take lines up to 80% equity.)  Also this could make refinancing a pain since they are considered a lien-holder.
4.  "There is a maximum term of 30 years, so at year 30 if you still own the property and your agreement with Unison remains in place, it must be settled through property sale or by cash payment."  So if you still own the home in 30 years, you owe them a huge balloon payment, or they foreclose on your house.
5.  You will need to buy them out before being allowed to rent your property.
6.  They charge a "Transaction Fee" as part of the closing.  Not sure how much that it is.
7.  Any improvements you make, they are receiving 35% of the increased value while paying $0 toward the improvement.
8.  After 3 years you can "Buy them out" at any time.
9.  It's pretty screwy having a second-lien on your home that is based on the home's value.  I see this as complicating closing whenever you go to sell.  Do they have to sign off / agree to the selling price?   
10.  Based on these other terms, I fully expect this company to litigate with anyone that doesn't let them screw them over.  I.e. Company makes bogus claim that home value suffered do your lack of maintenance.  You either pay up or battle them in court.

Example:
$200,000 Home  They pay $20,000 down.  10 years home worth $400,000.  (I think this is pretty modest increase?)   $200,000 gain.  They get 35%  which is $70,000. 
Sounds good to me!  (Being the lender I mean!)


The only way I can see this working out for you as a buyer is:  If you want to buy a property that you don't expect to appreciate or will decline in value anyways.  (Then why are you buying?  To save on rent?)  So after 10-15 years, they've basically lent you a huge sum of money interest free.  (But especially consider #8 above as warning.)  There are many factors to appreciation, but 

Rare example for things sorta working out for buyer:  $200,000 Home.  10 years later home sells for  $200,000.  You borrowed $20,000 interest free for 10 years.  - I couldn't see this as being worth the legal risk or the risk of losing possible appreciation.

Because you have no monthly payment it sounds like this would help you get a higher approval.  Buy the house and pay them back 3 years later.  - Just hope the house hasn't appreciated too much.  (Again, not worth the risk.)
 

Who has the say on when to sell?

I'd rather take the hit on paying PMI then refinancing when the LTV hits 80%.  

/s
At the rate home prices are appreciating, it should be only 2 months to get that additional 10% in equity.

Doubling in value in ten years is a bit on the high side for the average home. It happens, but I think the average is probably closer to 20 years for that kind of gain. You should have some edge in figuring this by knowing what to expect from your local market - has it been super stable like Texas, big booms and busts like Florida or Las Vegas?

Thanks for all the feedback and comments. I realized that some of the information is on their site but who better than my fellow fatwalleters to knock some sense in me and not even think about them. I agree 80-10 down and 10 a second mortgage may be better. I have to stop my self from dipping in 401K loan as I have a feeling consensus will be a big NO here.

Borrow from somewhere else and reverse the leverage? Put down 50% to get 65% of the gain, then take a HEL at 50% if you're allowed.

Seem like a situation of head i win, tail u lose. If the house appreciates they win big with leverage, if it fall you are responsible because u didn't keep up maintaince. And with interest rate so low now, this business seems so profitable.

frodobaggins said:   I have to stop my self from dipping in 401K loan as I have a feeling consensus will be a big NO here.

I did a 401k loan to add to a house down payment, no regrets at all. I can't think of any other use for the loan that I think is smart, but buying a home to live in is a safe and smart investment in general. The 401k loan has some unique advantages - it isn't reported to credit bureaus or factored in to DTI calculations, and your interest cost is just moving money into a different account you still own. I had planned to pay it off rapidly, but wound up seeing it through to its full 5 year term. If the alternative is PMI or a 2nd mortgage, I think it can be a smart option. Job stability seems like the important issue for you to think through - if you leave that employer, the balance might be due immediately. I was a little lucky, my entire department split from the original company and Fidelity let me arrange to keep making regular payments directly. I'd have been able to pay it off if needed, but that was cheap and convenient.

SlimTim said:   
 
I did a 401k loan to add to a house down payment, no regrets at all. I can't think of any other use for the loan that I think is smart, but buying a home to live in is a safe and smart investment in general. The 401k loan has some unique advantages - it isn't reported to credit bureaus or factored in to DTI calculations, and your interest cost is just moving money into a different account you still own.

  Plus the lost gains from not having the money in your 401(k).  

Yes, and it was a booming stock market while I had a 401k balance. But the money went into another investment that was booming too. Considering the leverage of the mortgage, we actually came out ahead, though I wouldn't count on that. There's no avoiding that adding to my down payment involved funds that could not also be invested in the stock market. But the point about taking money out of investments is partly why I think there may not be any other smart uses for a 401k loan.

There are some areas where you can not expect your home value to increase, I could see this being useful in some of those areas. However, I would still avoid this type of deal -- of course.

Hypothetical back of the envelope calculation (involving living in same house through entire mortgage):

If you do this on a 30 year $100k loan at 4% with 10% down and 10% matched, you save $47.74 per month, or $17186.40 over the life of the loan. If you invest that extra $47.74 per month at 6% it grows to ~$48k (~18k in, 30k gains). Subtract 9k taxes on gains and 10k for their share of the property value, you're ahead almost $30k.

If your house goes up $85k (85%) over those 30 years, their 35% share of the gains is $30k.

I don't understand their calculation In the 3 examples shown https://www.unison.com/how-it-works/  
While the property gain is only 20%, why "Unison Share of Change in Value" are 35% and 43.75% ?
Why in table the "Unison Share of Change in Value" are $35,000/$70,000/$87,500 as 70% ?
Their calculations seems not based on partnership of 10% (in property value) nor 50% (in equity) ?

cestmoi123 said:   
SlimTim said:   
 
I did a 401k loan to add to a house down payment, no regrets at all. I can't think of any other use for the loan that I think is smart, but buying a home to live in is a safe and smart investment in general. The 401k loan has some unique advantages - it isn't reported to credit bureaus or factored in to DTI calculations, and your interest cost is just moving money into a different account you still own.

  Plus the lost gains from not having the money in your 401(k).  

  If you only withdraw the bond portion of your portfolio, it doesn't matter.  You are just buying a bond where you know the bond issuer personally. Then the only cost is the double taxation on the interest - so Marginal Rate * Loan Interest rate or around 75 basis points.

calvin888 said:   I don't understand their calculation In the 3 examples shown https://www.unison.com/how-it-works/  
While the property gain is only 20%, why "Unison Share of Change in Value" are 35% and 43.75% ?
Why in table the "Unison Share of Change in Value" are $35,000/$70,000/$87,500 as 70% ?
Their calculations seems not based on partnership of 10% (in property value) nor 50% (in equity) ?

  
Not following you here.

Assuming a 20% down payment, 10% from you and 10% from Unison.

Purchase price=X
Sale price=Y

Unison puts down 0.1*X
When the sale comes, Unison gets their 0.1X back, plus 35% of (Y-X).  

If Y-X is <0 (i.e. you sold for a loss), 35% of that loss offsets their initial investment.  

 



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