Downpayments have been found to be the biggest barrier to homeownership. Young buyers in particular struggle to save and scrounge the typical 20 percent needed to avoid mortgage insurance.
MarketWatch reports that a few companies such as Unison and OWN Home Finance have launched programs that offer money for a downpayment. In exchange, the buyer gives the company a portion of the home’s equity.
Unison, for example, contributes half of the downpayment, which comes out to 10 percent of the total cost of the home. When the owner sells, Unison takes 35 percent of the profit.
The arrangement can get muddled if the home’s value doesn’t appreciate as planned, if the homeowner wants to sell within three years, and if the homeowner wants to refinance. Also, owners need to take care of their property. If not, Unison will send out a third-party appraiser to assess how much money the home lost due to improper maintenance.