Analysis Featured

Helping Home Buyers Make Down Payments for a Dream Home

unison home ownership

One of life’s biggest dreams is owning a home, but lack of funds, especially for down payment, proves to be a stumbling block for some would-be home owners. Unison is unique in that it helps home purchasers with their down payments without lending them money. It allows people to buy more home, remove the mortgage insurance expense, or reduce monthly payments.

A recent report by the US Census Bureau shows the home ownership rate decreased to 63.7% in 2016, the lowest yearly average in 50 years.

Millennial lack of savings is well documented, creating a catch-22 for prospective homeowners. Home buyers want to put a substantial portion of the sales price down to ensure monthly mortgage payments are sustainable, but on the flip side, they don’t want their entire net worth sitting in one illiquid asset. Unison not only understands the pain point of the consumer, but has created a new category of home ownership by investing in homes through Unison’s HomeOwner and HomeBuyer products.

An Upstart Trades Cash for Home Equity

Unison (earlier FirstREX), founded in 2005, is headquarters in San Francisco, California with a team of 70 employees and regional sales managers. The company launched its homeownership investment product in 2007, through which it has so far managed to invest more than $300 million. The initial capital invested was raised from pension funds and endowments.

Founder Thomas Sponholtz, Unison CEO and chairman of Unison, was co-head of the fixed income group at Barclays Global Investors prior to Unison. At Barclays, he was instrumental in the development of the first fixed income ishares (ETF). A year later, James Riccitelli, joined Thomas as Co-CEO and they launched the initial product at Unison. Riccitelli started his career with Nomura Securities in New York, a leading securities and investor banking company. He later headed the Nomura venture fund that focused on Fintech start-ups.

Residential real estate in the US is the largest asset class with a 2016 total value of $23.9 trillion, out of which $13.7 trillion is made up of household equity and the rest comprised of debt and mortgages. The mortgage side is becoming a commodity but there is a massive dearth of products targeting homeowner equity. The underlying idea behind Unison was to target the residential real estate market on a massive scale by concentrating a financial product that allows homeowners a way to fund their home purchase or to earn equity through a home ownership investment.

Unison is not a lender. Rather, it is licensed along similar lines as a real estate broker and provides a feasible platform to purchase real estate. In the last 10 years, Unison has revolutionized home ownership investing. Its flagship products include a product for home buyers and a product for home owners.

Product for Home Buyers

The Unison HomeBuyer program paves the way for people who wish to buy their home by providing half of the down payment required. On top of that, the contribution is not considered a loan. Rather, it is an investment that can be held for up to 30 years and gives Unison 35% of the upside or downside of the home equity. It is a true partnership where both the company and home owner win or lose together in a varied ratio.

This product is apt for the new-age American who doesn’t like to save but is capable enough to afford the EMI of home ownership. By sharing the down payment 50-50 in home purchase with the buyer, Unison lessens the burden of Loan to Value (LTV) for the home buyer. This mitigates the requirement for mortgage insurance on the homeowner’s part, thereby lowering monthly installments by 15%-20%.

Product for Home Owners

Unison HomeOwner program provides a special platform for existing homeowners to tap into their home equity without adding to their debt or payments on a home equity loan (HELOC). Unison provides a lump sum amount in cash, in some cases up to 20% of the home value, to empower homeowners to have access to their equity. The samount received can be used up for to 30 years as a cash cushion for financial stability, to pay off debt, for remodeling of a home, and for investing in a child´s education. In exchange, Unison participates in sharing the downside risk and upside potential in the change in the home’s value whenever the owner decides to sell.

Unison takes a second lien position on the property and usually does not require approval from the first lien holder. To ensure all parties are on the same page, the company works only with lenders that have pre-approved Unison. This relationship is of great value to the lenders as it enables lenders to offer different products and to tap a larger category of prospective buyers who lack cash for the entire down payment. Unison has already worked with eight well-known lenders such as Guild and Freddie Mac, and enables the customers to pre-qualify for a regular mortgage while offering a homeownership investment.

Unison does not get any tax benefit or write offs from property taxes, and mortgage interest still goes to homeowners. It also helps the homeowner reduce his capital tax burden when the house is sold as the investment returns are shared between Unison and the homebuyer.

Unison for Retirees

Unison is also useful for retirees. It provides an opportunity for buyers who are looking to downsize by putting a share in the down payment for the new home and enabling the retiree to have much more cash to meet their medical and other expenses. Unison specializes in helping people survive on retirement income while maintaining equity in their homes by giving them an option to sell their home equity for cash that can be used up to 30 years without payment of any EMI.

Unison operates in 13 states and plans to expand to many more. The company is the category leader, and its unique proposition and ability to hold pure equity for such long terms creates a valuable moat for the business.


Written by Heena Dhir.


default image

"Your daily letter is great!" , Ram , Founder and CEO, PeerIQ

default image

"Hi George - just want to tell you that you are doing a great work with Lending Times;-) Brgds, Kasper" , Kasper, Partner and Co-founder at Dansk Faktura Børs A/S

default image

"I've been following your newsletter for some time now and have been very impressed with the content." Charlie,Co-Founder | Bolstr

default image

"Hey George, I must say I really enjoy your site. It has inspired me to do some changes at our platform and we are the biggest consumer lender in Sweden." , Ludwig, CEO @ Savelend Sweden AB

default image

"Your daily email is very useful. It gives quick update on what's going in the market. Thank you very much for all that info." Yann Murciano, Head of Base Metals Trading at Morgan Stanley

Our daily p2p news digest

Daily News Summary Digest Sent Daily To Your Inbox