CRLLS
Thinks s/he gets paid by the post
I searched and did not see any previous discussion on this topic.
I received an post card yesterday. It was an interesting offer from Unison for a unique (to me anyway) home loan. They offer the homeowner cash for up to 20% of the current market value of your home. In exchange, they share in future appreciation of your home. They also share in any loss in market value. Possibly at a lower %? There are no interest charges and no monthly payment required. They get paid when you sell from 3 to 30 years later.
I had to dig deeper to find the details. There is a 3.9% one-time fee on the money received. So for a $50,000 cash "loan", the "origination fee" which covers all appraisal fees etc, would be $1,950. From then on, there are no payments to be made until you sell, or at 30 years later you must pay beak the principal and their chare of any appreciation. You can buy them out also before the 30 years are up. I wondered how could they be making any money on the appreciation of the their share of the home value. As it turns out, they take a bigger share of future appreciation than their 20%, possibly up to 50%. That means their gain may be up to 2-1/2 times the appreciation value of the home. I would assume that interest paid in the final payback is not tax deductible.
I am not planning on taking their offer. I just wanted to learn more about this. With such great minds here, I'm sure they can educate me about this business model? How might it compare to other equity type loans. I'm not focusing on applicability to the FIRE community specifically. Are there any situations where this might be better than a HE loan. Would it work if someone was planning to sell in 5-10 years in a stagnant real estate market?
I received an post card yesterday. It was an interesting offer from Unison for a unique (to me anyway) home loan. They offer the homeowner cash for up to 20% of the current market value of your home. In exchange, they share in future appreciation of your home. They also share in any loss in market value. Possibly at a lower %? There are no interest charges and no monthly payment required. They get paid when you sell from 3 to 30 years later.
I had to dig deeper to find the details. There is a 3.9% one-time fee on the money received. So for a $50,000 cash "loan", the "origination fee" which covers all appraisal fees etc, would be $1,950. From then on, there are no payments to be made until you sell, or at 30 years later you must pay beak the principal and their chare of any appreciation. You can buy them out also before the 30 years are up. I wondered how could they be making any money on the appreciation of the their share of the home value. As it turns out, they take a bigger share of future appreciation than their 20%, possibly up to 50%. That means their gain may be up to 2-1/2 times the appreciation value of the home. I would assume that interest paid in the final payback is not tax deductible.
I am not planning on taking their offer. I just wanted to learn more about this. With such great minds here, I'm sure they can educate me about this business model? How might it compare to other equity type loans. I'm not focusing on applicability to the FIRE community specifically. Are there any situations where this might be better than a HE loan. Would it work if someone was planning to sell in 5-10 years in a stagnant real estate market?
