Unlock Home Equity Agreement Review 2023 – Forbes Advisor

In exchange for access to some of your home equity, you’ll pay a number of costs to Unlock and third parties.

Unlock Share

Unlock Share is the most essential fee to understand before entering an agreement. This fee is the percentage of your home’s future value you’ll have to pay to Unlock when you exit the HEA. It applies whether your home’s value increases or decreases over that time.

The more cash you accept up front, the larger the Unlock Share will be later. Since Unlock offers its clients 5% to 35% of their equity up front, the maximum equity you could pay to Unlock at the end of your agreement can range from 10% to 70%.

The percentage of your home’s future value that you’ll owe Unlock depends on the percentage of your home’s current value that Unlock gives you today. It also depends on the property’s occupancy type and your credit score.

Unlock offers a calculator on its website to give you an idea of what you might pay.

Annualized Cost Limit

What you ultimately owe for your Unlock Share is subject to an annualized cost limit of 19.9%. This limit is the most your HEA can cost you annually, expressed as a percentage. It’s comparable to the interest rate you could pay on a loan.

Unlock’s product guide provides several clear examples of how the annualized cost limit works.

Appraisal

Unlock calculates your beginning home value (which affects how much cash you can get) and your ending home value (which affects what you owe) based on an appraisal. It uses the same process as mortgage lenders to order an appraisal from an unaffiliated third party

If either you or Unlock disagree with the home’s appraised value, the party who disagrees can request (and pay for) a reconsideration or a new appraisal between $400 to $800.

Origination Fee

Unlock’s 4.9% origination fee is higher than the standard origination fee for a first mortgage, which tends to cost 0.5% to 1.0% of the loan amount. For a HELOC or home equity loan, some lenders waive the origination fee.

Maintenance Adjustment

You may also have to pay for a maintenance adjustment. If your home is in worse condition than it was at the beginning, Unlock will obtain independent third-party estimates of the cost to repair the damage. You would only owe Unlock a percentage of this amount since the company only shares in a percentage of your home’s change in value.

Improvement Adjustment

If you’ve improved your home, you might request an improvement adjustment when exiting your agreement. You’ll need to supply the appraiser and inspector with detailed photos showing the “before” condition of the improved area. You’ll also need to provide any building permits, plans or other evidence of the work.

For example, if these experts determine that improvements you made increased your home’s value by $50,000, that amount gets subtracted from your home’s ending value. In other words, Unlock doesn’t get anything from the value of your improvements, only from your home’s change in market value.

Other Closing Costs

To close with Unlock the first time, you’ll also pay for:

• A home inspection
• Title services
• Escrow services
• Recording fee

When it’s time to exit the home equity agreement, you’ll pay some or all closing costs again, depending on whether you sell or refinance your home, or neither. Administration fees may also apply if, for example, you refinance your mortgage without repaying Unlock and Unlock has to agree to the title change.

You’ll also need to repay your Unlock Share. If you can’t cover the cost or liquidate another asset, selling could be your most likely option to exit the HEA. However, Unlock points out that there’s no guarantee a mortgage lender will offer you a loan with an HEA in place.