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When it comes to accessing your home’s equity – often the most significant investment for many of us – homeowners have had only a few basic choices: we could either sell our homes and obtain the equity in the sale, take out a home equity loan, or start a home equity line of credit (HELOC). Fortunately, however, thanks to the explosive growth of online finance and banking platforms, homeowners have more options now when it comes to accessing and using their equity.
One of the major innovations to come out of web-based and mobile financial services companies is the growth of companies that offer to actually invest in your home and change the way in which homeowners purchase homes and tap into their equity. This growth in home co-investing and other similar platforms has provided consumers an interesting alternative to purchasing a home the traditional way since in many cases the challenge of making a down payment is altogether eliminated.
The ability to access your equity without a home equity loan or a HELOC is also a relatively new phenomenon as well. Having increased equity in your home can often provide you with a great financial advantage since it allows you to borrow against your equity for any reason you choose.
One of the new and innovative companies that can help homeowners hoping to use their home’s equity is Hometap. This company provides an innovative loan alternative that provides a new path to homeownership by tapping into a home’s equity. With that being said, let’s take a close look at Hometap and the services it offers, so you can find out whether or not it would be a good choice for you.
Onto our Hometap review!
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Hometap Equity Partners
House rich cash poor? Looks take a deep dive into how Hometap works, what the pros and cons are, and who can benefit.
What is Hometap?
Hometap is an innovative finance company founded in 2017 and headquartered in Boston, Massachusetts. Hometap offers an alternative method for homeowners to “tap” into their equity.
Instead of a lending instrument such as a home equity loan or HELOC, Hometap instead invests in the home’s equity itself, providing you, the owner, cash for the investment.
This investment can be up to 30 percent of the home’s value. At some point in the future, and along a time horizon that can be up to ten years, the homeowner will be required to settle the investment, based upon the original terms agreed upon.
Hometap’s investment in a home’s equity is not a loan, and there is no interest or monthly payments required; the homeowner only has to settle with Hometap within the 10-year investment timeline.
In order to use Hometap, there are some eligibility requirements. There is no hard credit score requirement, but most homeowners using Hometap have a score of 600 or more.
The homeowner must have at least 25 percent equity in his or her home, and homeowners must live in the home in question at least six months out of the year.
Finally, Hometap only operates in Arizona, California, Florida, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oregon, North Carolina, and Virginia. If you want to use your home’s equity and you don’t live in one of these states, you will have to look at other options in order to do so.
Hometap is available to homeowners in the following states:
- New Jersey
- New York
- North Carolina
How Does Hometap Work?
Working with Hometap is somewhat similar to applying for a home equity loan or a HELOC, although the Hometap online platform enables you to do most of the work from the comfort of your own home.
To start the process of obtaining funds for your equity, you will have to fill out an online form on the Hometap website. If you meet all of the Hometap eligibility requirements, you will receive a preliminary qualification.
Then, you’ll have to have your home appraised to verify it is complete, after which Hometap will finalize its offer. Once this is complete, and should you accept, you will then receive the agreed-upon funds from Hometap, which will be wired into your designated account within a few days.
After Hometap invests in your property, you will be required to meet some reasonable standards. For example, you’ll have to pay your mortgage and insurance in a timely manner and maintain your home in a high state of repair.
When you sell your home, or you come to the end of your ten-year Hometap term, you’ll be required to pay back Hometap’s share, which is a percent of the value of the home at that time.
Depending on whether your home’s value increased or decreased over the time period of the Hometap investment, you may have to pay more or less than what you initially received.
RELATED: Shared Equity Mortgages.
Hometap takes pride in the fact that they make the overall process of getting into a deal with them relatively easy. They even claim that they could have your money wired to you in as little as three weeks. This is excellent because it can have you moving along with your plans to use your home’s equity plan very quickly. The entire process is going to be straightforward and simple, let’s take a walk through the overall process of working with Hometap.
- Estimate request: You can request an estimate on their website and see if you qualify in seconds.
- Number preparation: They’ll work through some ideas and then present some of the most viable options to you.
- Official application: If you agree with the terms presented then you will fill out the official form to start doing business with them.
- Home appraisal: Once you agree to a deal, Hometap will bring a third-party appraiser to determine the current value of your home.
- Wire funds: After that, they will send over the money to you for you to put into your home and claim equity.
- Investment settlement: Hometap does deals in ten-year terms, so before that tenth year is up you are required to pay back the percentage of the home that you agreed to give them.
Overall, the process is very simple and straightforward. Though, ten years can go by very quickly so again it is very important that you come into this deal with a well-thought-out plan.
Why Would You Want Increased Equity?
When it comes to homeownership, equity is the market value of your home minus what you still owe on your mortgage. For example, if your house is worth $400,000 and you have about $250,000 left to pay on the mortgage then you have $150,000 worth of equity in your home.
Equity works for you like no other loan does. This is because when you have equity in your home, you are able to borrow against it. The amount of equity that you can borrow against depends on your specific contract, but across the board, you can typically borrow against 85% of your current equity. So, if you have $150,000 worth of equity, as mentioned above, then you’d be able to borrow $127,500 because that is 85% of $150,000.
When you borrow against your equity, you are going to have to pay it back. This means that it is only a good idea to tap into your home equity if you are in an emergency or you are going to use that equity money to make more money. This makes tapping into equity a great way to fund investments. Whether you are going to invest in stocks or start a business, it is a nice way to be able to get a lump sum of money to work with. If you borrow $100,000 from your equity and make a 20% return over the course of a few years, then you could pay back the equity loan and walk away with $20,000.
Forced Savings Account
Building up equity in your home is sometimes referred to, somewhat derisively, as a forced savings account. This is because you have no choice but to pay the monthly mortgage payments. As you pay the monthly payments, you are gaining equity in your home. That equity can be looked at as a savings account if you are interested in borrowing against it. Additionally, if you are looking to hold onto your equity then you can look at it as a part of your investment portfolio because if your home appreciates then you will have a return on your investment.
Overall, having as much equity in your home as possible gives you the ability to build up long-term wealth if you go about it in that sense. Hometap is a great way to be able to tap into that high level of equity and put it to use.
Who is Hometap Good For?
Hometap’s services can be really useful for consumers and homeowners in a wide variety of situations. However, tapping into your home’s equity using this platform is not always the best choice for everyone. Everyone is in a different financial situation, which ultimately means that they will benefit from different types of services designed to access their equity; at times it may not make sense to access your home’s equity at all.
Considering a co-investment with Hometap is a good choice if you have some equity in your home that you would like to borrow against for a specific reason. You would be able to borrow a lot more money if you have the co-investor because they will boost the equity that you have in your home. The thing to understand is that whatever you purchase against your home has to be paid back.
With that in mind, you are going to get much more benefit out of this deal if you have a plan that involves using your equity money to make more money. At the very least, you need to have a plan as to how you are going to pay back the equity loan. You may use the money however you choose to do so, but you can dig yourself into a hole if you are not wise with it. Hometap claims that their clients use the higher equity to purchase other properties, invest in businesses or even renovate the home. This is something that can be of great benefit to you if you are looking to go down one of those roads.
Hometap Customer Service
Customers who want to contact Hometap can do so via the following options:
- Phone: 617-415-4419. Hours are Mon-Thur 8 am – 8 pm EST; Fri 8 am – 5 pm EST
- Email: [email protected]
- Mail: You can send correspondence to Hometap at 800 Boylston St., 16th floor, Boston Massachusetts, 02199
- You can also complete an online query form to contact Hometap as well.
Hometap Reviews & Complaints
Hometap has a rating of 4.8 stars on Trustpilot with over 180 reviews, which is excellent. Over 92 percent of Trustpilot reviewers gave Hometap an excellent rating, while less than 1 percent gave the platform a bad rating. Hometap is also accredited with the Better Business Bureau and carries an “A” rating with the BBB as well.
Additionally, LendEDU did a full overview of the company that Hometap is running. Overall, they had a very positive outlook on what the company provides and how they go about running their business. Some of the most notable benefits that were shown by LendEDU were the fact that the process is nice and easy. In addition to that, they took a major liking to the idea that there are no loan repayments as well as no interest that needs to be paid back. This is because Hometap is not necessarily profiting off of you, they are profiting off of the market value.
LendEDU did point out a couple of areas where Hometap could use improvement; for example, the site noted that long-term homeowners should be very cautious when going into a deal like this since it could be very bad if you are forced to sell the home in order to pay them back. The only other negative point that LendEDU noted is the fact that you cannot get immediate funds for an emergency situation. This means that if you need a lump sum of money within the next ten days, you are probably out of luck. A typical deal with Hometap takes a couple of weeks, so it is important to plan for that when coming into the deal if you expect to need cash reserves urgently.
Hometap Pros and Cons
Hometap is among the most innovative financial companies to date. The platform offers services that are still relatively new and could benefit many people if they understood them better. Since a transaction with Hometap is a major undertaking that is going to last up to a decade, it is important to weigh all of the pros and cons of working with Hometap. Any company that you work with is going to have some aspects of it that are not entirely favorable, the idea here is to make sure that the downsides to this deal don’t make it so you cannot enjoy the benefits. With that being said, let’s walk through some of the biggest pros and cons that come with working with Hometap.
- No Monthly Payments. One of the best things about accessing your home’s equity via Hometap is that you’ll never have to make any payments like you’d have to with a HELOC or home equity loan.
- Simple and Low Impact. Hometap uses an intuitively simple online application that is considerably more forgiving than you’ll experience with a lender. Also, applying to work with Hometap won’t have an impact on your credit, either.
- Forced Sale Threat. If at the end of the ten-year term you are unable to settle with Hometap, you could be forced to sell the house to meet your settlement obligations.
- Appreciation Risk. If your home increases in value, you could end up owing significantly more to Hometap at the end of your ten-year term than you anticipated.
Make sure that you are weighing all aspects of this deal before going into any type of contract with Hometap. It may be a good idea to get a second opinion from someone who has a good understanding of the topic. On the surface, this deal looks nearly perfect but there are certainly things that you need to be cautious about.
The primary alternative to Hometap is Point.com, which offers similar services for homeowners to access their equity. Otherwise, the platform competes with lenders that offer HELOCs and standard home equity loans, traditional and online lenders offering HELOCs, and home equity loans.
Other homeowner funding reviews:
Frequently Asked Questions (Faq)
Is Hometap a good idea?
Hometap is worth considering if you are looking to access your home equity but you aren’t keen on the idea of taking out a loan.
Unison Vs Hometap. How do they compare?
For a full, in-depth look at Unison, check out our review here.
Shared Equity Loans: Hometap Review
Hometap is offering a service that is relatively new that allows you to access your home’s equity without having to worry about monthly payments or interest. While there are some risks, checking out the platform’s innovative services is definitely worth it if you need to use your equity in a relatively quick manner. As with any major deal, you have to assess your situation and the platform’s services and conditions quite carefully before signing any contract, because there are some notable risks that come with this model.
Consumers who are able to meet Hometap’s requirements and follow the easy steps to apply for their services can often put themselves into a more advantageous position financially. While the program is certainly not for everyone, the long repayment period may give you the time and space you need to address a serious problem, fund a business, or improve your home, and not have a lender breathing down your neck looking for monthly payments. After all, Hometap is there to help you with obtaining more equity in your home that you can use to benefit yourself. The most important thing in dealing with Hometap or any other comparable financial services company is making sure it is a good fit for your situation. So, talk to a trusted advisor as soon as you can to see if Hometap is the right choice for you.
Enjoy our Hometap review?