Ideas in housing finance

I received a solicitation in my personal mail recently. It was a letter from Unison, which offered me money based on my homeownership. I get a HELOC solicitation almost every week, but this was different, most notably because it wasn’t offering a credit product. Unison proposed to give me a sum of money in exchange for a portion of the proceeds years from now on the sale of my home. The letter made it clear this is not a loan, but an offer to sell an investment in my house.

Unison, a San Francisco-based fintech started in 2004, offers homeowners a unique way to get cash now based on the value of their home in the future. The company might offer $50,000 today with the expectation of being repaid when the home is sold, the proceeds coming from the difference between the home’s value today and its value when it is sold. It is kind of like a mini version of tax-increment financing, where a municipality sells tax credits based on the anticipated appreciation of land values. Unison will offer up to 20 percent of a home’s value. For the homeowner, the program might feel like a loan, only there’s no monthly payment. Also, there is no impact on the homeowner’s credit rating.

In addition to generally rising home values, Unison probably benefits from the use of the investment funds it gives customers. Many of them likely use the money to make home improvements — a kitchen remodel or addition — which naturally increases the value of the home and improves the odds that unison will make a good return on their investment.

I am not saying I am going to follow through on Unison’s offer, but I applaud the creative nature of the proposition. If you explore the Unison website, you will see that a bank in New Jersey has figured out a way to boost its own business by partnering with Unison.