Amazon employees who want to buy a home but can’t afford a mortgage without selling some of their company stock now have a Better option.
Better, the digital lender, on Tuesday announced a program available to Amazon employees called Equity Unlocker, which will allow them to use the equity they hold in the company as collateral for a mortgage, without having to sell their shares.
Previously, Amazon employees had to sell their equity to use it to buy a home, or take out a potentially costly, daily mark-to-market margin loan against their stock.
Better said Equity Unlocker is non-mark-to-market and non-recourse, meaning the terms of the loan won’t fluctuate with the stock market. Under the program, Amazon stock used as collateral, will be valued at the time of the home appraisal, and then the rate and term can be locked, using Better’s digital platform.
On average, Better said, the interest rate for Equity Unlocker will depend on the terms of the mortgage loan, but should still be significantly lower than the average rate for a margin loan, while having all the other benefits of a 30-year, fixed-rate mortgage.
The company said Equity Unlocker is available immediately in Florida, New York, and Washington state, and can be used by both current and former Amazon employees with vested equity in Amazon.
Better said it created Equity Unlocker after noticing that many Amazon employees had already trusted Better, funding over $1 billion for their home financing needs, and that equity compensation was a particular concern for those customers.
"At Better, our mission is to make homeownership cheaper, faster, and easier for all Americans," said Vishal Garg, founder and CEO of Better. "The status quo is broken. The entire process around homeownership is opaque and stressful.”
He continued, “For young professionals burdened with student debt and lack of savings, we know how hard it is to buy a home. This problem is exacerbated when many of the best and fastest growing companies increasingly reward their employees with equity rather than cash.”
A recent Schwab survey found that 43% of millennials have exercised or sold their equity compensation, which makes up nearly one-third of employee net worth. With the Equity Unlocker mortgage, Better said, Amazon employees can afford a home by pledging, not selling, their equity in Amazon.
That gives them the best of both worlds, allowing them to buy a home while also continuing to participate in the growth of their employer.
Better noted there are 54 million millennials in the U.S. workforce, and that over 70% say they can’t afford to buy a home because of student loans, inflation, and the home affordability crisis.
And even if they save enough for expenses, other costs can quickly add up, including closing costs, furnishings, and an emergency fund for repairs. The combination of all of these factors make it increasingly difficult for millennials to gain access to homeownership.
In addition, for those who, like Amazon employees, have equity, it is often difficult and costly to tap into that, Garg said.
“Even though equity is a valuable asset, it is considered ineligible by most banks and financial institutions when calculating the necessary down payment on a home,” he said. “Today, we are very excited to announce that we have created Equity Unlocker to help Amazon employees unlock their equity, their homes, and their futures.”
Better said it has been an Amazon Web Services (AWS) customer since the company was founded in 2015. Better’s loan origination system, Tinman, is powered entirely by AWS, leveraging numerous products to support cloud computing, processing capacity, and software needs, the company said.
"Better collaborated with AWS and Amazon leaders to find new ways to engage customers in the home-buying journey,” said Chandan Sharma, managing director of worldwide business development, enterprise and industry verticals at AWS. “Equity Unlocker was built on AWS to help Better reach more customers, and extend their buying power. By building Equity Unlocker on AWS, Better is able to innovate continuously, and improve the user experience while continuing to provide best in class service to their customers.”
Better added that it plans to eventually make Equity Unlocker available nationwide to employees of other public and private companies, offering the flexibility to leverage their vested stock for all of their home ownership needs.
