Hometap Review: A Great Way To Access Cash

My house has increased substantially in value since we moved in. All that home equity can be tempting. I’ve always been aware of home equity loans and home equity lines of credit (HELOCs), but the monthly payments and interest keep me away.

Now there’s another option. Home equity sharing companies consider themselves investors in your home’s value. They give you some extra money now, then take a share of the profits when you sell your home someday.

One of those investors is Hometap, a company that makes transparency a priority. But is home equity sharing a good option for you? And if so, is Hometap the right company to use? 

What is Hometap?

Founded in 2017, Hometap helps by giving a little extra cash to homeowners who have built a little equity. Like other home equity sharing companies, Hometap doesn’t give you a loan. It instead makes an investment in your home. In fact, the company refers to its funding as “Investments” with a capital “I.”

Hometap is the first home equity sharing company I’ve researched, and I was impressed with what I saw. Everything you need to know is laid out on its site, as well as explained in an easy-to-understand video. But here are all the important details you need to know about taking an investment from Hometap.

How does Hometap work?

First, you’ll want to take the Fit Quiz to see if you’re even eligible for a Hometap investment. If you aren’t a homeowner in Arizona, California, Florida, Massachusetts, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, or Virginia, you don’t need to take the quiz. You’ll be told that you don’t qualify right off the bat. Otherwise, use the drop-down to choose your state.

You’ll then simply choose your planned use for any investment you would get through Hometap.

The next series of questions is designed to help you determine whether this is the right option for you, versus a home equity loan or home equity line of credit.

You’ll need to provide your name and phone number before Hometap will tell you whether it’s a fit for you. Once you’ve input that information, though, you’ll get your answer.

If Hometap says it’s the right fit for you, you can proceed to the next step, which is getting an estimate.

To start the process, you’ll need to enter your property address to find out how much your home is worth. Also enter the type of property (single-family home, condo, etc.) and the property use (primary residence, vacation, or rental).

I live in Tennessee and therefore am not eligible for Hometap. But I was allowed to sign up to be notified if my address is ever included in their coverage area.

To try out Hometap’s services, I entered an address in Charlotte, North Carolina, and was immediately invited to get a no-obligation estimate.

After I input my contact information, I was asked what I’d be doing with the money Hometap provided. As you can see, the choices are pretty varied, including paying off debts, home renovations, emergency expenses, divorce settlements, and paying family expenses.

To prequalify you for a Hometap investment, they’ll need your Social Security number. You can skip this step, but you’ll have to speak to a Hometap representative to prequalify for the program. You can’t get your estimate without it.

Once you’ve input your information, you’ll go to your email, where a link will take you to an area to verify your account. This is where you’ll set up a username and password.

The dashboard will give you a handy place to view and upload documents and check the status of your estimate. But first, you’ll need to give Hometap a few details about the property to ensure your estimate is accurate.

Once you’ve filled out your profile, you’ll just need to wait until a Hometap Investment Manager gets in touch with you.

Pricing for Hometap

You’ll have no out-of-pocket costs to work with Hometap. But Hometap’s fee, along with closing costs, will be deducted from the amount that’s sent to you. Your specific costs will be provided in an estimate before you finalize the investment, but here’s a basic rundown of what you can expect to pay:

• Hometap’s fee: 3% of the investment amount.
• Appraisal fee: $500-$800 (estimated).
• Title fee: $700-$800 (estimated).
• Recording and title transfer fee: $370-$1,000 (estimated).

You can pay off the loan in cash at any time without penalty. But if you sell your house within 10 years, Hometap will take a portion of the sale price. This will be outlined in your offer, and it will depend on the equity in your home and the amount you’re borrowing. But if Hometap agrees to give you money for a 10% stake in your house, the company will take 10% of the sale price.

Hometap features

If you’ve been in your home for a while, Hometap could be a great alternative to home equity loans. Here are some features that make it worth considering.

No monthly payments

When you take an investment from Hometap, you enjoy all the benefits of a home equity loan without the monthly payments. You won’t have to pay on the loan until you sell your house, although you can elect to pay the loan off at any time before that.

No interest

If you get a home equity loan, you’ll have to repay the amount plus interest, which can cost hundreds to thousands of dollars. Hometap makes its money on the 3% signing fee, which comes out of your investment, as well as any extra it gets if your house appreciates between your investment and the time you sell it. Aside from the typical closing costs found with any loan, you won’t face any other fees or charges.

No restrictions on usage

Traditional lenders often limit the reasons for home equity loans. Hometap doesn’t have those limits. You can use the money for anything you want, including paying off credit cards, buying a vacation home, or going back to college.

Easy qualification

Hometap uses a combination of your home’s equity and your credit score to qualify you for an investment. You’ll need a credit score of at least 630, but your debt-to-income ratio won’t factor in as it does with home equity loans.

No out-of-pocket costs

Other loans will have closing costs associated with them. With Hometap, the fees will come out of your investment amount, so you won’t have to worry about bringing any money with you to closing.

Easy repayment

Your investment is yours to keep or spend for the full time you’re in the house, with a limit of 10 years. If you sell the house during that time, the money from the equity in the house will take care of your Hometap investment.

No prepayment penalties

You can pay back your investment at any time during the 10 years following closing. There are no penalties, whether you pay part or all of the money back over the course of your time in the house.

No-obligation estimates

Hometap is upfront about the fact that its service isn’t for everyone. There’s a Fit Quiz that helps you see if you’re eligible before you proceed to the prequalification stage. If you move forward to prequalify, you’ll be able to get an estimate with no obligation to follow through on it.

Easy closing process

The application process is completely online, with Hometap walking you through each step of the process. You’ll be given a portal that serves as a handy place to upload and view all the documents associated with your investment. Once you’ve been approved and the appraisal has been completed, Hometap will schedule a signing to close the investment and get you your money.

No home inspection required

With some home loans, including refinances, a professional home inspector will come to your home and look it over. Although Hometap does verify your home’s value through an appraisal, no inspection is required.

Short time to close

Home equity loans can take a month or longer from application to close. Hometap works hard to streamline the process, often turning investments around in a couple of weeks. Once your signing is complete, you’ll typically have the money in your account within four to seven days.

My experience researching Hometap

I live in one of the states that don’t qualify for Hometap (bummer), but it definitely sounds like a good idea. It’s a great alternative to home equity loans and lines of credit. As a homeowner who plans to move in a few years, I can see the value in having funds now and letting Hometap take its money out of the sale of my home.

One thing that piqued my curiosity as I was researching was the stake Hometap has in its investments. If you get an investment from Hometap, you agree to pay your mortgage on time and take care of your house. Which sounds easy enough. But I wonder if Hometap monitors that somehow, or if the contract stipulates what counts as “upkeep.”

The big question I had was what happens if the real estate market tanks after Hometap makes an investment. But that question is answered on their FAQs page. Hometap doesn’t take the full amount it invested when someone sells the house. Instead, the company takes a share of the sale or market price of the home, which means in some cases, it might actually lose money on the deal. But if the home appreciates, they can make a pretty good profit.

I’d say what impresses me most about Hometap is its transparency. Any question you have, you can likely get answered through a quick Google search. There is even a video that explains how Hometap works. When you’re weighing various options, this transparency can be refreshing.

Who is Hometap best for?

Cash poor homeowners

Hometap is designed for homeowners who are “house rich but cash poor.” Previously, the only option available to those homeowners was a home equity loan or line of credit. Both come with interest payments. Hometap lets homeowners tap into that equity now without paying monthly payments.

Homeowners with equity

To participate in Hometap, you’ll need to have substantial equity in your home, which probably means it’s gone up in value since you moved in. Hometap looks for homes with at least 25% equity, and your investment offer won’t always be for the full amount.

Those looking for smaller loans

Hometap will invest up to 30% of the equity you have in your home. If you have $100,000 in equity in your home, Hometap might approve you for $30,000, but chances are, it will be a smaller amount. 

Who shouldn’t use Hometap?

Long-term homeowners

Before you take an investment from Hometap, keep in mind that you’ll need to repay it within 10 years. If you plan to stay in your home longer than that, make sure you’ll be able to come up with the cash to repay the funds before the 10 years are up.

Newer homeowners

It takes time to build up equity in your house, and Hometap requires a loan-to-value ratio of no more than 75%. That means you’ll need to at least have paid 25% of your home’s value. If you’ve only been in your home for a couple of years, unless you made a hefty downpayment at closing, chances are, you won’t qualify.

Those in prohibited states

Unfortunately, most homeowners won’t be able to participate in Hometap investments. Hometap is currently only available in the following 13 states:

Hometap vs. competitors

Noah

If you aren’t sure whether you’ll be selling your home in the next 10 years, Noah might be a better alternative. Noah takes its repayment from the sale of your home or a payment from you, like Hometap. But you can also pay back the funds by refinancing the home.

Otherwise, Noah is similar to Hometap. You have 10 years to repay the funds, and Noah takes a percentage of your home’s value when you sell the house. Noah will consider homeowners with a loan-to-value ratio as high as 85%, so if you don’t have the 25% equity Hometap requires, that’s another reason to consider Noah.

Unison

If you’re in one of the states where Hometap and Noah aren’t offered, take a look at Unison, which is available in 29 states. Unison has a higher maximum loan amount, at $500,000, but it caps its loans at 17.5% of the home’s value. So unless you have a high-dollar home with quite a bit of equity, you’ll need to compare its offerings to what you can get with Hometap or Noah.

But Unison’s biggest selling point is its time to repay. You have up to 30 years to pay off the funds you get from Unison. For long-term homeowners, this is definitely a better option than the other two, which require you to either pay off the loan or sell (or refinance) your home within 10 years.

Summary

If you need some extra cash, your home’s equity can be a great resource. With a Hometap investment, you can save on the interest you’d pay on a loan and skip the monthly payments. However, it’s important to look closely at how much you’ll be giving up when you sell your home. If your home increases substantially in value, you may find that the share Hometap takes from the sale is higher than what you would have paid in interest.

Read more:

• What Is A Home Equity Loan & Home Equity Line Of Credit (HELOC)?
• Home Equity Reality Check: Everything You Need To Know Before Taking Out A Home Equity Loan