Unison unveils ‘hybrid’ equity sharing loan

Unison unveils 'hybrid' equity sharing loan

Home equity solutions provider Unison on Tuesday launched a new product that combines the features of traditional mortgage financing and emerging residential real estate investment (HEI) options.

San Francisco-based Unison is calling its new offering the Equity Sharing Home Loan. The company explained that the product works as a “hybrid between debt and equity.” It is initially available in Arizona, Utah and Colorado, and a spokesperson said the company plans to expand to states that represent 50% of U.S. home equity by the end of this year.

The product is a second mortgage with a below-market interest rate, allowing a homeowner to tap into their equity without refinancing their existing mortgage. Like other types of HEI products, this allows Unison to share in the future appreciation of the property. But it also differs from a typical higher education institution in that it includes qualification and repayment terms similar to a mortgage loan or home equity line of credit (HELOC).

“Whether homeowners are looking to renovate their homes, consolidate high-interest debt or secure their financial future, Unison’s Equity Sharing Home Loan offers a versatile and customizable solution to suit their individual needs and ambitions,” Unison President Ryan Downs said in a statement. declaration. “With lower monthly payments made possible through shared home appreciation, homeowners can confidently pursue their financial goals.”

The product has a repayment term of 10 years, interest-only. Eligible borrowers must have a FICO a score of 680 or higher and a debt-to-income ratio of 40% or less. The maximum combined loan-to-value ratio of the property may not exceed 70%. Borrowers with higher credit scores may qualify for more favorable loan terms, according to Unison.

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Borrowers can repay the loan early without penalty. This includes the repayment of the initial loan amount, any deferred interest and the agreed portion of the valuation. Additionally, homeowners who make improvements to their homes, in addition to anything considered “regular maintenance,” can apply for a value-added loan after three years to reduce the shared appreciation component of the loan.

Unison has plans to securitize these loans on the secondary market, the spokesperson explained. In June, the company closed a Securitization of $215 million supported by equity investments. The transaction was reviewed by DBRS Morning Star.

From the second quarter of 2024 ICE mortgage technology reported that U.S. homeowners collectively have $11.5 trillion in tapped home equity, defined as the amount that can be accessed while maintaining 20% ​​equity.

Home equity investments are gaining momentum as homeowners look for new ways to access equity without taking on additional debt. Companies like it Point, Home tap, Unlock And Strive make higher education institutions available to consumers, a task made easier by investor demand in the secondary market. Higher education providers estimate that the market is worth between $2 billion and $3 billion per year.