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Amazon Employees Can Use Stock to Buy Homes

Written by Ashley Sutphin Posted On Monday, 06 March 2023 00:00
Amazon Employees Can Use Stock to Buy Homes

Amazon employees will soon have the chance to use company stock as collateral when they're applying for home loans. The program is going to be available through Better.com, an online lender.

The Equity Unlocker program will be available in Florida, New York, and Washington.

For current and former employees with vested company equity, the opportunity to access the program will become available in those states.

Better's CEO and founder Vishal Garg said in a statement that the company's goal is to make owning a home cheaper, faster, and easier for every American. Better said, as a result, it's excited to announce the Equity Unlocker program to help Amazon employees achieve homeownership.

Using the program, Amazon employees will pledge but not sell their stock, which will make up their down payment. However, when an Amazon employee uses the program to buy a home, they will pay a higher interest rate on their mortgage.

Borrowing costs will range between 0.25 and 2.5 percentage points more than the normal market rate, and how much more depends on how an employee structures their down payment.

In its statement, Better said that in the past, Amazon employees would need to sell their equity to afford a home, or they'd have to take out a potentially expensive margin loan against it. The Equity Unlocker product, according to Better, is non-mark-to-market and non-recourse. What that means more simply is that the loan doesn't change as the stock market does.

The head of real estate at Better, Nick Taylor, spoke to HousingWire, saying that the companies have been working on the program since  mid-2022. The digital lender said it saw many Amazon employees already using their platform to fund home purchases. The company funded more than $1 billion in home loans for employees of Amazon, and equity compensation was often a specific concern for these borrowers.

Better said they were interested in finding ways to leverage equity value that Amazon employees accumulated during their time with the company.

The Amazon share prices determine equity value for buyers, and then rates are locked in from there.

Better says it will look at the pledge and value the equity at 50% of the current share price.

Better considers the date an offer is made on a home, and then they calculate the share price for Amazon on that day.

Employees can put no cash down, and they don't have to liquidate stock for a down payment and, at the same time, can build equity in a home. Since the stock is pledged rather than sold, buyers continue to profit from the company's success, but if shares drop in value, the mortgage terms remain the same.

Pledging Amazon shares isn't taxable, and the mortgage program isn't just for a primary residence. Eligible buyers can use the program for a second home or an investment property.

The steps include first getting a pre-approval letter from Better Mortgage. Then applicants can see their estimated share value. From there, a Better Mortgage Loan consultant confirms the Amazon shares, and the buyer can choose their loan terms. Then, at closing, the shares are pledged as collateral, but a homebuyer using the program can't sell their shares until they pay their mortgage principal in full or refinance.

Better will also offer an option to sell shares if the proceeds would pay a percentage of the principal.

If you use the Better program, there wouldn't be any impact from leaving Amazon or changing your job within the company.

The alternative would be if a bank offered someone a margin loan. These were mentioned above—they're usually daily mark-to-market loans. In these cases, if the value of someone's equity went down, they'd have to pledge more shares to use as collateral for their loan. You could have to liquidate equity, put up more money, or even be forced to sell your home if the stock price dropped significantly. Equity Unlocker won't require any of those things from buyers.

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