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Previously, in order to access the home equity in your home, you would need to take out a home equity loan or line of credit. This would come with added debt and a monthly payment. Today, however, there are several new ways to access your home equity. One such option, a home equity sharing agreement through Hometap.
At its core,
If you consider yourself “house rich but cash poor,” Hometap might be the right opportunity for you. Here’s how it works.
In this review:
How Hometap Works
Before we dive into how Hometap works, note that the company only serves homeowners in Arizona, California, Florida, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Virginia, and Washington.
Hometap offers homeowners the ability to be paid today for the equity accumulated in their home. This payment doesn’t act like a loan, where you take on debt and have a payment to make each month. Instead, Hometap invests alongside you and participates in the proceeds once the home is sold.
The eligibility criteria isn’t super clear. Mainly because each property has to be evaluated independently. However, Hometap has provided some recommended qualities that can make you a good fit:
- Your single-family home or condo is located in an eligible state (see above)
- You have a credit score above 600 (though there is no FICO requirement)
- You have a minimum of 25% equity in your home
- The investment amount you are looking for is under 30% of your home value or under the maximum investment amount of $400,000)
Accessing your home equity in exchange for cash from
Should you choose to move forward, you must get a home appraisal to determine the current value of your home. If you’re approved,
After the paperwork is taken care of and recorded, you’ll receive your money. You get to decide what to do with it; since you’re not taking on new debt, you won’t be adding another debt payment to your monthly budget.
When you’re ready to sell or have come to the end of your investment term,
The length of a
Homeowners who do business with
Benefits of Using Hometap
Hometap offers a unique way of accessing your home equity, the benefits of which include:
No Loan Payment and No Interest
No Home Inspections
Easy, Straightforward Process
No Impact On Your Credit for an Estimate
Downsides of Using Hometap
There are a few drawbacks to using Hometap. Let’s look at the biggest ones:
No Immediate Funds for Emergency Situations
If you need money fast, you likely won’t be able to wait. You might want to go with a personal loan lender that can have money to you in days instead of weeks. If you go that route, pay close attention to the APR you’re offered to make sure you’re not taking on more than you can afford. To compare options, you can see our picks for the best personal loans.
Long-Term Homeowners Should Be Cautious
If you think you might want to stay in your house longer than the investment term, you may not want to use Hometap. That’s because the investment must be settled in 10 years or less.
Should you choose not to sell your home during the investment term, you’ll need to find an alternate funding source to repurchase the
If you’re certain you’ll be able to settle your debt without selling,
You Could Risk a Forced Sale
If, after 10-year you can’t otherwise come up with the money to settle the investment, you could be forced to sell your home. This could mean accepting less than what your house is worth so that you can repay
It’s worth pointing out that unlike a lender,
Your Home Could Go Way Up in Value
On the surface, this doesn’t sound like a negative, right? You’d love for your home to increase in value. But if it rises more than you expected, Hometap could benefit more than you do. Suddenly, you might be forking over way more money than you first estimated. However, Hometap does observe a 20% annual appreciation cap to prevent them from benefiting from substantial growth in your home’s value.
Still, if you live in a neighborhood that has seen climbing home values, you might be better off taking out a traditional home equity loan than risk losing a much bigger payday down the road. To compare options, see our picks for the best home equity loans.
As of February 4th, 2021, Hometap has a 4.8 out of 5 on Trustpilot. To read some customer reviews, click here.
If you can’t afford or don’t want a traditional loan payment but could put up to $250,000 to good use, tapping into your home equity could be a wise investment.
Up to 10 years
Author: Shannon Serpette