Companies Help Buyers With Down Payment In Exchange For Piece Of A Home’s Equity

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January 06, 2017

A couple in Southern California was able to get $65,000 towards their $650,000 house from a company called Unison. In exchange, when the house is sold years from now, the couple will owe Unison its initial investment plus 35 percent of the value the home gains.

The Los Angeles Times reports that several emerging businesses help buyers with cash up front to afford more expensive homes. The company then gets a portion of the equity (based on how much money is needed for the down payment) when the owners sell. In the case of Unison, if the owners don’t sell after 30 years, they have to get an appraisal and cash the company out.

Housing finance watchers don’t see this as a return to the kind of high-risk lending that sparked last decade’s financial crisis. Unison customers must have good credit, qualify for a standard mortgage and make at least a 10% down payment … Deals with Unison and other firms come with a big tradeoff: In exchange for a smaller mortgage, buyers give up a big chunk of the value their homes might gain.

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