Hometap brands itself as “the smart way to tap into your home’s equity.” Many financial institutions offer home equity loans, but Hometap uses a different model. The company provides home equity investments. As an alternative to home equity loans, home equity investments allow homeowners to leverage their equity without taking out a loan.
In this review, we’ll explain home equity investments and take a closer look at Hometap.
Pros and Cons of Hometap
- Get funds of up to $300,000 without monthly payments
- Home equity investments don’t impact credit scores
- Fast application process that only takes minutes to complete
- Must pay back the investment or sell your home within 10 years
- Not available in every state
What Does Hometap Offer?
Hometap offers home equity investments, which are an emerging alternative to home equity loans and lines of credit. So, Hometap is an investment company, not a lender. It doesn’t issue loans that use your home equity as collateral the way standard financial institutions do.
Instead, Hometap offers cash advances in exchange for a stake in your home’s equity. Depending on your situation, you can qualify for an investment of up to 30% of the home’s value in cash. This investment comes due in 10 years. At that time, the investment can be paid back by using savings, selling your home, taking out a loan, or refinancing your mortgage.
How Do Hometap Investments Work?
To illustrate how the Hometap program works, let’s dig into an example. So, suppose you own a home worth $250,000. You’ve built up $100,000 in equity through a combination of your down payment, monthly mortgage payments, and property appreciation.
You need $25,000 to finance a major purchase, and Hometap agrees to provide it by investing in your property. They, therefore, acquire a 25% stake in your future home equity, since the $25,000 you received represents that proportion of the $100,000 home equity you control.
Since Hometap attaches a 10-year term to its investments, you have that amount of time to repay Hometap with 25% of your home equity. Over the course of that decade, your monthly mortgage payments increased your home equity stake to $150,000. Also, your home is now worth $350,000, and the $100,000 in appreciated value gets added to your equity stake, raising it to a total of $250,000.
You need to repay Hometap 25% of the $250,000 sum, which equals $62,500. So, you sell your home for its market value, repay the $62,500 with Hometap, and pocket the remainder after paying off the outstanding balance on your mortgage.
All the while, you remain in control of your home. Hometap doesn’t appear anywhere on the title deed or official documents.
What Happens If You Accept a Hometap Investment?
After you apply and decide to proceed, then you’ll need to have your home appraised to confirm its current market value. You may also be asked to submit documentation confirming your home equity stake from the financial institution that issued your mortgage.
Hometap will then finalize a formal offer and submit it for your consideration. If you accept it, then Hometap will schedule a signing date. Once all the documents have been signed and processed, Hometap will electronically transfer the funds into the financial account of your choosing. From there, you need only prepare a strategy for settling the investment in 10 years’ time.
How Can You Pay Back the Investment?
There are a few common ways that homeowners pay back their Hometap investments:
- Selling their home
- Refinancing their mortgage
- Taking out a home equity or personal loan
- Using savings you’ve built up
Hometap has no preference for any single approach. However, if you can’t come up with the money without selling your home, your agreement may compel you to put the home on the market in 10 years to pay back the investment.
What To Expect on the Site
Hometap’s website is very user-friendly and easy to navigate. It has a complete digital library about home equity investments, loans, and lines of credit. These unbiased and factual educational resources can help homeowners decide whether the Hometap program might be a good fit without any pressure.
Additionally, the Hometap website makes it easy to get a free estimate. In order to find out if your home qualifies, Hometap has a prequalify form that only takes a few seconds to complete. After you click on “Get an Estimate,” Hometap will ask for a bit of information:
- Where’s your home?
- What’s the property type? (Single-family, for example)
- How do you use the property? (Primary residence, for example)
- How are you most likely to use a Hometap Investment? (Renovate my home, for example)
- What’s your name and contact information?
Following this step, Hometap will prepare an estimate based on the information you provided. It’s a non-binding, ballpark figure, and you are under no obligation at this stage.
Hometap’s home equity investment plans cost homeowners nothing upfront. Instead, there’s a 3% fee from the funds Hometap sends you. And since it isn’t a loan, homeowners don’t need to make monthly payments.
Any costs you incur will happen when the 10-year term arrives. Even then, costs are tied to your ownership stake in your home. Most Hometap clients never pay anything out-of-pocket.
What People Are Saying About Hometap
On Trustpilot, Hometap has an excellent score of 4.8 out of 5 stars as of May 2021:
- 91% of customer reviews give Hometap 5 out of 5 stars
- 97% of customer reviews give Hometap at least 4 out of 5 stars
Hometap has been accredited by the Better Business Bureau (BBB) since 2019. As of May 2021, Hometap has an A+ BBB rating, which represents the best possible grade. There were also zero outstanding complaints filed against the company during the preceding 12-month period.
The Bottom Line
Hometap is a highly transparent, reliable company with high customer satisfaction ratings. If you’ve determined that a home equity investment could be right for you, then Hometap merits close consideration as you compare top home equity options.