Unlock Home Equity Review: Rates, Features and How It Compares
Written by
Rudri Patel
Edited by
Antonio Ruiz
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Unlock offers homeowners a chance to enter into a home equity agreement (HEA). An HEA is an agreement between Unlock and a homeowner. Unlock will give the homeowner a one-time lump sum payment in exchange for a percentage of the home’s value. The homeowner will repay the lump sum plus the appreciation when the agreement ends, the house is refinanced or sold.
Unlike traditional home equity and HELOC options, you’re not required to make monthly payments and no interest accrues, so you can choose the repayment plan that works best within your budget and financial needs. At the end of the agreement term you’re required to repay the lump sum and the increase in the home’s value.
Here’s a summary of the Unlock HEA, including fees, requirements, pros and cons and how Unlock compares to other lenders.
What Is a Home Equity Agreement?
In a home equity agreement (HEA), a homeowner receives a one-time lump sum payment in exchange for the lender to receive a percentage of the value of the home when the agreement ends, the home sells or is refinanced.
How Does a HEA Work?
In a HEA, the lump sum payment is based on the home’s value and equity. The payout is given at one time. The homeowner isn’t required to make any monthly payments and no interest accrues. In exchange, the homeowner agrees to share a percentage of the home’s value with the provider.
The agreement typically lasts 10 years. At the end of the agreement, when the homeowner sells or refinance, the following will happen:
- The homeowner repays the original lump sum.
- They also pay a share of any increase (or decrease) in the home’s value.
What Are the Main Features of a HEA?
While not strictly a loan, a HEA has a few features usually found in a traditional loan.
- Term length: Ten years
- Funding amount: From $30,000 to $500,000.
- How to qualify: A minimum credit score of 500 and typically 20% to 40% home equity
- Repayment. At the end of the term, selling or refinance of the home, or through a buyout agreement
Quick Summary: Is Unlock the Right Fit for You?
A HEA is ideal for:
- Borrowers who prefer not having monthly payments.
- People who have significant home equity but don’t want to take on additional debt.
- Borrowers who need flexibility to use their in how to use their funds.
- People who have limited income but need access to cash.
A HEA is not ideal for:
- Borrowers whose house is expected to rise significantly in value.
- People who want full ownership if their home appreciates.
- Borrowers who need access to funds quickly.
- People who plan to sell or refinance their house within a predictable timeframe.
Pros and Cons of Unlock Home Equity Agreements
A HEA offers flexibility but it also comes with limitations. Here are other pros and cons to consider:
Pros
- You can access cash without taking on new debt. A HEA isn’t a traditional loan. You get a lump sum in exchange for sharing future home appreciation.
- You can use the funds however you like. Funds can be used for home renovations, paying down debt or taking a vacation.
- You may be able to qualify with a lower credit score. Your credit score can be as low as 500 and you may still potentially get approved.
- You can avoid interest. You don’t need to make monthly interest payments with a home equity agreement.
Cons
- You give up a portion of your home’s value. This could be expensive in the long run if your house value increases significantly.
- Repayment terms are defined. Repayment occurs at either the 10 or 30 year mark or if you decide to sell, refinance or transfer ownership.
- Agreement can be complex. You have to read the terms carefully.
- There’s limited availability of HEAs. Home equity agreements aren’t available in every state or for some property types.
What Types of Home Equity Products Does Unlock Offer?
Unlock offers only one home equity product — the home equity agreement. You can access a lump sum payout for a percentage of your home’s appreciation. With the HEA agreement, the homeowner is required to repay the sum plus the appreciation in the house. Unlock takes on the market risk. If the house value declines then Unlock’s share declines too. If the house appreciates, Unlock’s return increases too.
Are There Fees or Closing Costs for Unlock’s HEAs?
A HEA usually includes an early closure fee. Here are other fees to consider:
- Application or annual fees. There’s no application or annual fees.
- Closing costs. There are no closing costs in most states if you keep the agreement open more than three years.
- Origination fees. A fee of 4.9% of the original sum will be charged and deducted at the closing.
- Early closure fee. There’s a $450 early closure fee (within 36 months) if the home equity agreement is bought out early.
- Possible other charges. Other charges may include appraisal, title search, inspection, and escrow. Recording fees may also apply depending on your location.
Who Qualifies for a Home Equity Agreement with Unlock?
If you have moderate to substantial equity but a low credit score, you can still qualify for a home equity agreement with Unlock.
- Credit score: Minimum 500
- Equity requirement: Typically 20% to 40%
Other requirements include:
- Proof of income: W2s, bank statements and tax returns
- Low debt-to-income ratio: Preferably under 43%
- Credit history: No recent bankruptcies on your credit report
Pro Tip
If you’re self-employed, be prepared to submit extra income documentation to verify your earnings.
What’s the Application Process For an Unlock HEA Like?
The process to apply requires little to minimal effort.
- Application method: You can apply online via Unlock’s website. No phone calls or in-person visit needed.
- Prequalification: A soft credit inquiry can be used for prequalification. It won’t impact your credit.
- Funding time: The funding time is usually two to four weeks.
In addition, you’ll need the following documents:
- Government-issued ID
- Mortgage statement
- Homeowner’s insurance declaration page
- Trust docs and rental agreement
How Does Unlock Compare to Other Lenders?
Unlock requires similar credit scores and offers comparable term lengths as its competitors.
| Lender | Credit Score Required | Payout Range | Term Length | Closing Costs | Best For |
|---|---|---|---|---|---|
| Unlock | 500 | $30,000 – $500,000 | 10 years | 4.9% origination fee + 3rd-party fees; no closing costs if held 3+ years | Homeowners who don’t want monthly payments and don’t mind giving up a part of their home’s value in the future |
| Point | 600 | $35,000 – $500,000 | 30 years | 3% to 5% origination fees plus closing costs | Borrowers looking for larger payouts and lower buyout penalties |
| Hometap | 600 | $30.000 – $600,000 | 10 years | 3% to 5% plus closing costs | Borrowers seeking a shorter term and faster funding |
| Unison | 620 | $30,000 – $500,000 | 30 years | 3% to 5% plus closing costs | Homeowners looking for longer term access to home equity with larger payouts |
Final Verdict: Should You Choose Unlock?
Choose Unlock if:
- You want to tap your home’s existing equity without making monthly payments.
- You can wait two to four weeks for funding.
- You’re comfortable sharing your home’s potential appreciation.
- You want the option of $0 closing costs if the agreement stays open for more than three years.
Look elsewhere if:
- You need funds immediately.
- You have poor credit.
- You don’t have substantial home equity.
- You prefer a fully-fixed rate loan with a fixed repayment schedule.
Key Takeaways
- Unlock offers HEAs with no interest rate since it’s not a loan and a 4.9% origination for most users.
- The minimum credit score required for an Unlock HEA is 500.
- Most users will qualify if they have 20% to 40% home equity and a solid income.
- Unlock’s online tools and customer support are average. The entire application and servicing process is online.
FAQs about Unlock
- Does Unlock offer fixed-rate HELOCs?
- No, Unlock doesn't offer fixed-rate HELOCs, only home equity agreements.
- What is a home equity agreement, also known as HEA?
- A home equity agreement (HEA) allows you to receive a lump sum payment upfront in exchange for a percentage of your home's value when you sell or refinance.
- What happens if I pay off my HEA loan early?
- The HEA offered by Unlock is not a loan. If you choose to do an early payoff that means you'll purchase or buy out the agreement. You may pay a fee plus the current appraised value portion owed to Unlock.
- Is the interest in a HEA tax-deductible?
- There's no interest charged because a home equity agreement isn't a loan.
- Do I need to be an Unlock customer to apply for a HEA?
- You can still apply even if you're not a Unlock customer.
