Hometap Review: How a Hometap Investment Works

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Editorial Rating

Editorial Rating

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Highest customer reviews of all companies reviewed*

Maximum investment	$400,000
Maximum Loan-to-Value	75%
Term Length	Up to 10 years
Servicing Fee	3%

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*4.9 out of 5 on Trustpilot as of January 20^th, 2022.

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 is a home equity sharing agreement through Hometap.

At its core, Hometap gives you access to your home equity so you can use the funds for whatever purpose you want. You don’t need to take out a loan or face another monthly payment, making this an especially attractive option for cash-strapped homeowners in need.

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
• The Benefits of Using Hometap
• The Downsides of Using Hometap

How Hometap Works

Before we dive into how Hometap works, note that the company only serves homeowners in Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New York, Nevada, North Carolina, South Carolina, Ohio, Oregon, Pennsylvania, Virginia, Utah, and Washington.

The Basics

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 500 (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)

Application Process

Accessing your home equity in exchange for cash from Hometap is a simple process. You’ll first get an investment estimate for your property by completing an online investment inquiry, which takes about five minutes. If you qualify, Hometap will prepare a detailed explanation of the investment and explain what happens next.

Should you choose to move forward, you must get a home appraisal to determine the current value of your home. If you’re approved, Hometap will then give you the final investment offer, generally between 5% to 20% of your home’s current worth, up to $250,000.

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.

Repayment

When you’re ready to sell or have come to the end of your investment term, Hometap will collect what’s called the Hometap Share, it’s an agreed-upon percentage of your home’s sale price. Hometap makes more money if your home goes up in value but makes less — or may even take a loss — if it decreases.

The length of a Hometap investment term is 10 years. To pay off the investment, you can either buy it out with savings, take out a loan, or sell your home during the effective period.

Homeowners who do business with Hometap will be required to uphold the terms of the investment, which includes continuing to pay their mortgage, maintaining homeowners insurance, staying current on property taxes, and keeping the house in good shape.

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

Because Hometap is an investor, not a lender, you won’t face an additional monthly debt payment or any interest rate changes as a result of doing business with the company. In addition, since you can use the funds from a Hometap investment to pay off existing debts, you can also eliminate or significantly reduce your other monthly payments.

No Home Inspections

Although Hometap requires a third-party home appraisal, it won’t send anyone to your home for surprise inspections during the investment term. Essentially, there’s no ongoing commitment to the company until it comes time to sell your home or settle the investment.

Easy, Straightforward Process

The entire Hometap application can be completed online in about 10 minutes from the comfort of your own home. In addition, the Hometap process can take as little as two weeks from application to funding, making it faster than most standard lenders and home loan options.

No Impact On Your Credit for an Estimate

Hometap can determine if you qualify for an investment without a hard credit inquiry, which means your credit score won’t be impacted when you request an investment estimate on its website.

Free Cash Estimate

Ready to get an estimate with Hometap?

• No monthly payments. No interest.
• Get up to $400,000 without taking on debt
• Not available in all 50 states

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

Using Hometap is not the quickest way to get money in a financial emergency. Personal loan funding happens much faster, although it does involve taking on an additional debt payment, and the amount of available funding may be less than a Hometap investment. With Hometap, however, the process of getting your money can take two to three weeks.

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 Hometap investment (i.e. “buy them out”), which is called “settling the investment.” This might include accessing your savings or taking out a home equity loan. The settlement is computed based on how much your home is worth at the time.

If you’re certain you’ll be able to settle your debt without selling, Hometap can still be an option. But if the idea of potentially needing to take out a home equity loan or other means of financing 10 years from now is daunting, there might be better options.

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 Hometap by the deadline.

It’s worth pointing out that unlike a lender, Hometap does have the same incentive as you to get top dollar for any home it has invested in.

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.

Bottom Line

Hometap and home equity sharing companies like it aren’t a bad deal, but they are fairly new. That doesn’t mean they’re the wrong way to tap into your home equity, but you should do your research to make sure you understand how they work and if it’s the best choice for your financial needs.

As of January 20^th, 2022, Hometap has a 4.9 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.

Free Cash Estimate

• Receive between $15,000 and $600,000
• Buy out Hometap’s position any time within the 10-year term
• No monthly payments

If you aren’t sure if Hometap is right for you, check out our comparisons of Hometap vs. Unison, Hometap vs. Unlock, Hometap vs. Point, or Hometap vs. Noah. You can also check out our guide on Hometap competitors and alternatives.