According to the U.S. Census Bureau’s annual homeownership statistics, millennials are holding off on buying a home, in spite of the fact that this age demographic is willing but unable to buy a home. Most of the blame can be attributed to two causes: 1) they’re saddled with student debt, and 2) facing lower wages as they enter the workforce.
Overcoming the Down Payment
There are avenues for first time homebuyers to consider if they are interested in making an investment in their future but worried about being saddled with exorbitant interest rate payments. That’s where home equity financing comes in.
The process works like this: since most mortgages require 20% of a home’s value as a down payment in order to lock in a favorable interest rate, home buyers who don’t have that much money can supplement up to half of the down payment amount through a “home ownership investment program” such as one from a company called Unison.
The Buddy Method Of Homebuying with Unison
While this looks like a form of borrowing, it doesn’t come with strict payment deadlines or interest charges. Instead, repayment is postponed for 30 years or until the house is resold by the borrower. Unison then receives its original investment, plus or minus its share of the change in the home’s value.
Think of it like a partner investing in the home with you. While the homeowner owns and occupies the home, Unison holds a stake in its equity. If the equity increases by the end of the partnership, both the owner and Unison profit. If it decreases, Unison’s stake also typically diminishes.
Unison has the backing of institutional investors — such as pension funds and endowments — who are interested in investing in the U.S. residential real estate market. The model is meant to provide the final bit of capital that many people—especially millennials—simply can’t afford in the short term.
The extra funding Unison puts toward the down payment can give young home buyers the chance to enter the housing market without the burden of potentially excessive monthly payments if they can’t reach that 20 percent benchmark. Additionally, Unison’s model also offers buyers more leeway in the range of home prices they can consider making an offer on.
Millennial homebuyers should still do their homework and have a sober understanding of their financial forecast before buying a home. Young prospective homebuyers might consider whether the monthly payments on the house are manageable and what level of maintenance the house would require to maintain or increase its equity.
The Unison model of homeownership investment is about empowering potential homebuyers, but the buyer should be confident about what kind of homeowner they plan on being. For those millennials facing some of the unavoidable perils of today’s economic ecosystem, Unison might be the ally they need in retaking the American Dream.
For more information on this unique financing method, visit the Unison website here: https://www.unison.com/
I am experienced in helping move-up buyers and/or “seasoned” buyers, but really enjoy working with millennials and a younger age group to help them realize their dream of buying and owning their own home. If there’s a way to do it, I’ll help them find that way!