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There are billion-dollar pension funds, university endowments and hedge funds looking for a house like yours. These groups want to plunk down their cash in partnership with you for your home purchase. The funds don’t need to be paid back for 30 years.
The concept is called shared equity. It has been around for decades in the commercial real estate realm, but offered only recently in the residential real estate industry. One of the largest firms in the space is San Francisco-based Unison.
The challenge
One of the biggest hurdles for American homebuyers seeking conventional loans is getting over the 20% down threshold to avoid private mortgage insurance (PMI). This component of the monthly payment increases the cost of the home loan. In many cases, payments can increase by more than a hundred dollars each month.
This PMI scenario also limits the buyer’s options to get the best mortgage interest rates. There’s a solution.
Unison’s cash gets you to that threshold. No PMI is required. As a homebuyer, you then have access to more competitive mortgage interest rates, your monthly payment drops and you have greater cash flow. In most cases, Unison’s program can drop your monthly P&I payment by 25% or more as compared to a fixed conventional loan with the same amount down that includes the PMI component.
In episode #4 of The Arizona Report™, I explored the Unison Homebuyer product that only requires a down payment of only 10% of the sales price. Now, Unison has launched a 5% down program to improve on the same product. Goldwater Bank in Scottsdale is the exclusive partner with Unison in Arizona for this 80-15-5 program.
Michael Micheletti returns in episode #5 to share news about the new lower down payment limit.
Here’s how shared equity works during a home purchase:
- Homebuyer provides a 5% down payment
- After buyer qualifies, Unison contributes 15% at the close of escrow
- Homebuyer and Unison together reach the 20% down payment threshold to avoid private mortgage insurance (PMI)
- Buyer gets a more competitive interest rate and a lower payment because there is no PMI component
- Buyer has up to 30 years to pay off Unison
- At that point or before, buyer can sell the home, refinance or use cash to pay off Unison and close out the partnership
- Unison can be bought out after only 3 years into the 30 year time horizon
- If home goes up in value, homeowner and Unison share in the profit
- If home goes down in value, homeowner and Unison share the loss
For more information and for program specifics, visit the Unison Homebuyer web page. As of the time of this podcast, Unison serves customers in 22 U.S. states and the District of Columbia. States include Arizona, California, Colorado, Florida, Georgia, Michigan, Missouri, Minnesota, New Jersey, New York, Ohio and Pennsylvania.
This episode was recorded in our Scottsdale studio on July 19, 2018.
(Editor’s note: Michael Micheletti left Unison in mid-August 2018 to take another position in the financial services industry).
The only difference between a pigeon and the American farmer today is that a pigeon can still make a deposit on a John Deere.
– Jim Hightower, American syndicated columnist and former commissioner of the Texas Department of Agriculture
