What we like:
|Minimum credit score||530|
|Investment amount||$40,000 – $350,000|
|Term length||10 years|
HomeFunds is a home equity sharing company based in California. It allows homeowners to cash in on their home equity without a loan, debt, or monthly payments. Though the company’s services are currently only available in its home state, it has plans to expand into other areas soon.
In this HomeFunds review, we’ll go over how the company works, as well as how it compares to other equity-sharing companies that are on the market.
In this review:
- What does HomeFunds offer?
- How does HomeFunds determine how much to invest?
- How does the term of the agreement work?
- Are there any costs with a HomeFunds investment?
- Pros and cons
- Ratings and reviews
- Eligibility requirements
- How do I apply with HomeFunds?
- How HomeFunds compares to other companies
What does HomeFunds offer?
HomeFunds offers equity sharing arrangements for existing homeowners. Under these agreements, homeowners exchange a share of their home’s future equity for an upfront, lump-sum payment, which they can use however they like.
Essentially, HomeFunds sees itself as an investor in your home. You pay no monthly payment or interest costs, as you would with a home equity loan or another type of debt. Instead, you simply buy the investor’s equity share back at the end of the term (at its current market value at that time).
Many homeowners use home equity sharing to cover the costs of home improvements or to pay for sudden or unexpected expenses that might crop up (like high medical bills, for example). Equity sharing is often a good option if you have poor credit, as home equity loans, HELOCs, and other mortgage products typically require higher credit scores.
How does HomeFunds determine how much to invest?
HomeFunds offers anywhere from $40,000 to $350,000 in funding, though the exact amount you’ll qualify for depends on your unique scenario.
While HomeFunds doesn’t offer much insight into how it determines its investment amounts, most home equity sharing companies take into account a number of factors, including your home’s value, your mortgage balance, and your location. The use of the property (home, rental, investment, etc.) and your creditworthiness may also play a role.
How does the term of the agreement work?
HomeFunds’ equity sharing agreements last for 10 years. That means by the end of year 10, you have to buy out the company’s share of your equity one way or another.
Options for doing this include:
- Selling your house
- Using cash or savings
- Refinancing your current mortgage loan
- Taking out another loan, like a home equity loan or home equity line of credit (HELOC)
If you want to buy out HomeFunds earlier than the 10-year mark, you can. Homeowners can settle up with the company at any time, though an appraisal will be required (unless you’re selling the property).
Are there any costs with a HomeFunds investment?
There are several costs that come with a HomeFunds equity sharing agreement. First, there’s a one-time servicing fee of 3% to 5% of the total investment amount.
On top of this, you will also pay a variety of third-party fees, including those for an appraisal (typically $450), a title insurance policy ($380), title/escrow costs ($495), and more. Some closing costs can be deducted from the lump-sum payment, so you will not need to pay them out of pocket.
Those are just the upfront fees, though. In the long run, you will also lose out on a share of your home’s appreciation, should it increase in value over the course of the agreement. If this occurs, there’s a chance you might pay HomeFunds significantly more than the initial lump-sum payment you received.
Pros and cons of a HomeFunds home equity shared agreement
- No monthly payments
- No interest costs
- Payments up to $350,000 available
- Funds can be used for anything
- Minimum credit score is just 530
- Rental and investment properties are eligible
- Can buy out the company’s share at any time
- Funding is available within two weeks
- Currently only available in California
- You lose out on a share of your home’s appreciation, which could be significant
- Very few ratings and reviews are available
Ratings and reviews
Checking reviews and ratings is critical before doing business with any company—particularly one that impacts your finances. Websites like Trustpilot and the Better Business Bureau, for example, can help you glean whether a company is trustworthy and if past customers have been satisfied with their business practices.
Here’s how HomeFunds’ ratings and reviews measure up:
|LendEDU||3.6 out of 5|
|Trustpilot||4.1 out of 5|
|Better Business Bureau||Not yet rated|
|5 out of 5|
Currently, HomeFunds has very little presence on review and rating sites. It has not been rated by the BBB, and on Trustpilot and Facebook, ratings are based on very few reviews. Keep checking back as HomeFunds expands into other states, and more customers can weigh in on its services.
HomeFunds eligibility requirements
HomeFunds has less stringent eligibility requirements than other home equity products, at least when it comes to your finances. With HomeFunds, you need just a 530 credit score to qualify, and there is no minimum income required. However, you will need at least a 35% equity stake in your home, which is more than most home equity loan and HELOC lenders require.
|HomeFunds||Home Equity Loan||HELOC|
|Minimum credit score||530||620||Mid-600s|
|Income requirement||None||Yes, varies||Yes, varies|
|Term||10 years||5 to 30 years||10 to 20 years|
How do I apply with HomeFunds?
Applying for an investment with HomeFunds starts online, and according to the company, the entire process (including funding) is often complete within just two weeks.
Here’s what the process looks like:
- Get an estimate: Just click the “Get an Estimate” button on HomeFunds.com and fill out the short form. If your home is eligible, you can get pre-approved right away. You’ll also find out how much funding you could qualify for. Pre-approval does not require a credit check and will not impact your credit score.
- Fill out a full application: You’ll next fill out the company’s full application and submit a variety of documents related to your property and finances. You will also speak with a HomeFunds representative at this stage, who will answer any questions and guide you on your way.
- Get your home appraised: Scheduling a home appraisal is next, which you’ll do through a third-party appraisal provider. Once the appraisal is complete, HomeFunds will use the appraised value to finalize your investment offer.
- Sign your closing documents: Once you have a finalized offer, you can sign the final paperwork and close on your home equity agreement with HomeFunds.
- Receive funds: Finally, HomeFunds will wire you your payment, less a 3% to 5% transaction fee, an escrow fee, and other applicable charges. You can then use the funds for any purpose you wish.