Hometap review: Get paid cash for your home equity

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 pays cash to homeowners who have built a little equity. It’s not the same thing as taking out a home equity loan or a home equity line of credit. Instead of a loan, Hometap makes a home equity investment in the future value of your home (the company refers to its funding as “Investments” with a capital “I”). We’ll get into the specifics of how this works soon, but the basic idea is that Hometap is taking a share of your home’s future value in exchange for giving you cash now. 

When you sell your home, Hometap is entitled to a percentage of your home’s value. They will estimate what your home is worth when you apply to create an offer, but they may make more or less than estimated depending on what the value of your home actually ends up being when you sell it. Alternatively, you can buy out their investment without selling your home by paying them the percentage they are entitled to based on the current market value of your house. This is called a settlement.

Hometap is the first home equity-sharing company I’ve researched, and I was impressed with what I saw. All the information you need to make a decision is laid out on its site as well as explained in an easy-to-understand video. Hometap doesn’t operate in every state and has rules about who can borrow and how much home equity is needed to qualify.

How does Hometap work?

Here are the steps to find out if you’re eligible for a Hometap investment and apply.

See if your property is eligible

The Fit Quiz is used to quickly weed out applicants who wouldn’t be eligible for an investment. Several states are not currently served by Hometap, so this could automatically rule you out. 

If you’re a homeowner in one of the following states, you may qualify. These are:

• Massachusetts
• California
• New York
• North Carolina
• Virginia
• Florida
• Oregon
• New Jersey
• Michigan
• Minnesota
• Arizona
• Maryland

If you don’t live in one of these states, you won’t qualify.

If you do live in a state where Hometap operates, you’ll need to meet a couple of other requirements to prequalify for an investment. You must:

• Have a credit score of at least 500
• Have at least 25% equity in your home

Hometap can’t pay you more than 30% of your home’s value or $600,000, so this isn’t a good option if you need more than that.

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.

Request an investment estimate

If Hometap says it’s the right fit for you, you can proceed to the next step, which is getting an investment estimate. This is the amount Hometap would be willing to invest in the future value of your home. It may be a little different from your final investment offer, but this will give you an idea of what you’re working with.

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).

At this point, you’ll be able to talk with your Hometap investment manager about any questions or concerns you have.

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 is 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.

Apply

Once you’ve received an investment estimate and started talking to an Investment Manager, you can actually apply for Hometap. At this stage, Hometap will enlist a third-party home appraisal agency to assess your home’s value. This appraisal is used to help Hometap determine a fair investment offer.

Sign your offer

If you receive your official Investment offer and like what you see, you’ll move on to signing it. You won’t owe Hometap anything for 10 years, when you’re expected to pay them the agreed-upon percentage of your home’s value whether you’ve sold your house or not. You’re free to pay this amount sooner but are required to pay the amount agreed upon if you sell your home within this time. 

You’re under no obligation to share your plans for your home with Hometap or have any inspections done during the 10-year period. However, Hometap does give you the opportunity to have your investment adjusted if you put more than $25,000 into renovations. If you make a lot of improvements on your home and feel that you’ve increased its value significantly, you can submit documentation of the changes you’ve paid for to have your home appraised again.

If you have any questions about the details of your offer, you can talk with your Investment Manager.

Get your money

All that’s left to do is wait for the money to reach you. You’ll keep living in your home and can use the money however you want, whether that’s for a home project, a business venture, or something else. 

Most people get their Hometap investment in as little as three weeks from the day they apply or between four and seven business days from accepting their investment agreements.

Pay Hometap

You will have 10 years after taking an investment to pay Hometap their share. You can either give Hometap a percentage of the proceeds after selling your home if you sell within this time or settle the investment any time between when you take it out and when the 10 years are up.

If you sell your home, you will owe Hometap a percentage of the total amount your home sells for whether that’s more or less than the original value. If the value of your home goes up, Hometap will make more than originally estimated. If the value of your home goes down, Hometap will make less – but you are not responsible for paying the difference if this happens. 

Take this example. If Hometap agrees to pay you 15% of the value of your home when it is valued at $300,000, you receive $45,000 in cash up front. If you sell your home a few years later for $325,000, Hometap gets $48,750 from the sale (15%, adjusted). But if you sell your home a few years later for $275,000, Hometap gets $41,250.

Hometap doesn’t get a say in which offer you accept or play a role in the negotiations. You’ll just send whichever offer you do accept over to Hometap after everything’s finalized. The only stipulation is that you need to sell your home for market value or more. If your house sells for less than it’s determined to be worth at appraisal, you may be responsible for paying Hometap more out of your own pocket.

The other way to pay Hometap is by settling the investment. This would require you to come up with the money yourself if you end up changing your mind about selling your house or want to get out of the investment early. In this case, you will owe the percentage (agreed upon in your original contract) of your home’s value at the time of settlement. Again, it doesn’t matter whether the value has gone up or down – you’ll owe the same percentage. 

If you intend to settle, Hometap will send for an appraisal and use this to calculate what you owe. You may end up needing to take out another loan, using your savings, or taking out a second mortgage to hold up your end of the deal.

There is the risk that you need to sell your home even if you don’t want to in order to settle the investment. Forced sale is possible and changing your mind isn’t an option.

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 payout you receive. 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: $300-$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 whether the house sells for more or less than anticipated. 

Most people receive an investment offer for between 10% and 30% of their home’s value.

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.

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 and quick 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.

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 business days.

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.

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 is helpful.

Who is Hometap best for?

Hometap is a great option for the right people. Here are some examples of those who might be a good fit.

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.

Who shouldn’t use Hometap?

Hometap isn’t a perfect solution. For these people, it’s probably not ideal.

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 down payment at closing, chances are, you won’t qualify.

Read more: When does it make sense to put less than 20% down on a house?

Those in prohibited states

Unfortunately, most homeowners won’t be able to participate in Hometap investments. Hometap is currently only available in the following 12 states:

• Arizona
• California
• Florida
• Massachusetts
• Maryland
• Michigan
• Minnesota
• New Jersey
• New York
• North Carolina
• Oregon
• Virginia

How is Hometap different from a home equity loan?

A Hometap investment lets you leverage the equity you have in your home to take out money now. Instead of borrowing, you agree to give Hometap a percentage of what your home sells for. Because they’re making a home equity investment in the future value of your home, there’s no guarantee they’ll make money on this investment. Your home could even lose value. 

With a traditional home equity loan, you’re borrowing against the equity you have in your home and using your house as collateral. You make monthly payments to repay your debt, with interest, and if you can’t pay your loan back, the lender takes your home. 

A repayment term for a home equity loan could be anywhere from 10 to 30 years. Hometap gives you 10 years to pay them, but you always have the option to buy out or settle Hometap’s investment early if you don’t want to wait that long. You aren’t expected to make monthly payments and you won’t be charged interest. 

However, since you need to pay Hometap whether you sell your home or not, you could end up going into debt with this option and taking out a loan anyway. And because Hometap uses the percentage of your home’s value when you settle, you never know exactly what you’ll end up owing. 

Overall, home equity loans are less risky than home equity investments because you know exactly how much you will owe and will make regular payments rather than needing to pay a large lump sum and scramble to come up with the money if you don’t sell your house. And if you do take out a Hometap investment and sell your house, you’ll miss out on a chunk of the profits.

Hometap vs. competitors

Hometap is not the only company that offers home equity investments. Take a look at some of the competition.

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 and Washington D.C. 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.

FAQs

What credit score do you need to qualify for Hometap?

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 500 to qualify, ideally at least 600, but your debt-to-income ratio won’t factor in as it does with home equity loans.

Is Hometap a reverse mortgage?

No, Hometap is not a reverse mortgage. A reverse mortgage is a type of loan that allows seniors to access the equity in their homes. Like a home equity loan, the house is used as collateral. But unlike a typical loan or mortgage, the homeowner receives monthly payments instead of making them. Only when they move out or pass away does the loan come due.

Both reverse mortgages and Hometap offer a quick way to access cash on equity, but Hometap is not a loan of any kind. And instead of owing money back that they’ve borrowed, recipients owe Hometap a portion of their profits if they sell.

Summary

If you need some extra cash, your home’s equity can be a good resource. With a Hometap investment, you can save on the interest you’d pay on a loan and skip the monthly payments. 

However, there is significant risk that comes with giving up a portion of your home’s equity, and it’s important to look closely at how much you’ll be losing when you sell your home. If your home increases substantially in value, you may find that the share Hometap takes from the sale is more than what you would have paid in interest. And if you don’t sell your home, you’ll need to find another way to get the money to Hometap in time.

Read more:

• First-time home buying guide
• Single-family home vs. condo: Which should you buy?