How to Pay Off a Home Equity Agreement 

We get a lot of questions from homeowners about how they can buy back their equity. Since a home equity agreement (HEA) is not a loan, there are no monthly payments or interest-payment calculations to make, as there would be with a home equity line of credit or home equity loan. 

Instead, with an Unlock HEA, you decide when to settle with us, any time during the 10-year term of the HEA. Typically, it’s when one of the following five things occurs. 

1. You decide to sell your home. You can sell your home whenever you want. When you sell your house, the ending home value will be determined by the sales price if the home was listed on the open market and sold to an individual at a fair market price. Unlock may obtain an appraisal before closing in “sale by owner” transactions or sales to real estate investors if the sales price differs materially from the home’s fair market value.
    

2. You buy your equity back in full through an owner buyout. You can buy back your equity at any time during the term (without selling your home). Often, homeowners are able to refinance, or obtain a home equity loan or home equity line of credit during their HEA term. They then use those funds to buy back their equity.
   
   An owner buyout requires an appraisal to determine the ending home value, which helps determine the amount owed to Unlock. There is no prepayment penalty for completing an owner buyout with Unlock. 
   

3. You buy your equity back in partial payments over the term. Unlock’s HEA offers one of the most flexible plans available for buying back your equity. You can buy your equity back in partial payments whenever you want, at any time during the 10-year term of your HEA. The process is the same as with the owner buyout, except that you let us know what portion of your HEA you want to buy out.
   
   An appraisal (paid for by the homeowner) must be completed for each partial buyout. There is also a processing fee for each partial payment. For that reason, we recommend making partial payments of at least 25% or more of your payoff amount. As with the owner buyout, homeowners are often able to use funds they obtain through a home equity loan, home equity line of credit or cash-out refinance to do partial equity payments.
   

4. The last signatory to the HEA passes away. We require all owners of a property we invest in to be signatories on the HEA. If you, as a signatory, die during the term of the HEA and are survived by a spouse or other co-owner of the property who is also a signatory, the HEA will continue unaffected.  If you die and are not survived by anyone else who is a signatory, your heirs or estate will be required to settle the HEA by selling the home or completing an owner buyout. It’s important to discuss the HEA with your heirs and estate executor during your lifetime so that everyone understand the impact the HEA may have on the estate.  
   
   If you add a spouse or domestic partner to the property’s title during the term of the HEA, you should notify Unlock so that person can become a signatory.

5. You  reach  the  end  of  the  term. If you don’t sell your home or buy us out before the end of the 10-year term, you will need to settle with us at that time by either selling the home or completing an owner buyout.  

There are a few factors that could impact your home’s value when you choose to end your agreement. Here’s a look at two of the most common issues we take into account when determine ending home value.
 

Home improvements 

Making  home  improvements is a great way to increase the value and enjoyment of your home. As a  partner in homeownership, we  designed  the  Unlock HEA  to encourage and support homeowners who make improvements – meaning we do not share in the value created by home improvements you make at your expense.

Our Improvement Adjustment works by subtracting the value of the improvements you’ve made from your ending home value. For example, say, add a bedroom and update a bathroom after you enter your Unlock HEA. Ten years later, at the end of the HEA term, you sell your home for $800,000 (that’s the ending home value). An independent appraiser determines the amount that those improvements you made added $40,000 to the current value of your home.

Unlock would then apply a $40,000 Improvement Adjustment to the ending home value, effectively subtracting $40,000 from that $800,000 ending home value. The resulting $760,000 ($800,000 less the $40,000) is the amount on which we’ll receive our percentage share, as agreed upon in your agreement.

It’s important to note that investments you made in your home do not result in a dollar-for-dollar match in terms of increased value. And again, the value added through your improvements is determined by a third-party appraiser, not Unlock.  

Home maintenance 

During the term of your HEA, it  is  your  responsibility  to  maintain  your  home  in  good  condition,  subject to normal wear and tear. If you don’t, when it comes time to end the HEA, your home’s value will likely be less than it would have been, had it been property maintained.

That would  negatively impact  both  of  us. So, to ensure fairness, we provide a Maintenance Adjustment provision. It’s essentially the opposite of the Improvement Adjustment. Just as the Improvement Adjustment can decrease your ending home value, the Maintenance Adjustment can increase it.

For example, say you sell your home 10 years after entering your Unlock HEA. At that time, the ending home value is $30,000 less than it should be due to extensive termite damage, based on an independent appraisal, inspections and repair estimates. We would then adjust the ending home value upward by $40,000 so that we would not share in the losses caused by the lack of maintenance.
 

Staying up to date during your HEA term 

You’ll always know where you stand in your HEA with Unlock. Through our customer dashboard, you can access home equity statements any time that provide an estimate of your home’s current value, and an estimate of our share if you were to sell your home or complete an owner buyout at that time.
 

We’ve designed the Unlock HEA to help you access your home equity as simply as possible, with the greatest flexibility possible. If you have other questions, feel free to visit our FAQ.