– Owning your home is a major investment. Many homeowners choose to use the equity to make other uses of their equity. Co-investing is an alternative to taking out another monthly loan payment.
A home equity loan allows you to borrow against your equity and then receive a lump sum that you must pay each month for a set term, usually 15 years. Although the interest rate is generally fixed, it is often higher than your primary mortgage.
Co-investing can be an alternative to traditional equity loans. The co-investing company pays the homeowner an initial amount and then makes no repayments until the home sells. The homeowner might also have the option to purchase out the company after a set period of restriction. This option is ideal for homeowners who want to access cash quickly and without the financial burden of monthly loans.
Unison, a San Francisco-based realty company, is a leader within the rapidly growing field of coinvestment. Unison pays homeowners up to 17.5 per cent of the current market value of their home in cash. Unison will pay the owner a payment equal to their initial investment, plus (or less) a percentage (or both) of the home’s appreciated or depreciated value.
Here’s an example: A homeowner whose home is currently worth $500,000 and who needed $25,000 in cash (5 percent of the home’s value) would repay an amount equal to $25,000 plus 25 percent* of the amount the house appreciates in value during the time of the co-investment. A larger co-investment means that the company will receive a larger percentage of the property’s appreciation.
Although homeowners have the freedom to spend their money on anything they want, Unison suggests that homeowners invest in long-term investments such as medical expenses and tuition for children’s college.
Other benefits include the ability to keep remodeling results and equity that has been built through prompt mortgage payments.
A good candidate for homeowner coinvesting is no different to being a good homeowner. Unison expects homeowners to keep the home their primary residence. They must also keep up with mortgage payments, property tax, homeowners’ insurance, and other monthly bills. Unison should be kept informed about any changes to the home, including plans for remodeling or other emergencies like natural disasters or bankruptcy.
Visit Unison to learn more about how Unison can help homeowners get the best out of homeownership. unison.com.
*This is a possible percentage for illustrative purposes. The percentage actually paid varies depending on which HomeOwner transaction was made.
