Hometap Review: Hometap is an equity-sharing company that invests in homes in exchange for a portion of the home’s future value. Learn more in this review.
Hometap Review: How It Works and Is It Worth It?
At its core, Hometap allows you to access your home equity and use the funds for whatever purpose you choose.
You don’t have to take out a loan or make another monthly payment, which makes this a particularly appealing option for cash-strapped homeowners in need.
If you are “house rich but cash poor,” Hometap may be the right opportunity for you. This is how it works.
‣ Our Hometap reviews will cover:
‣ Hometap reviews trustpilot
‣ How Hometap Works
‣ The Benefits of Using Hometap
‣ The Downsides of Using Hometap
‣ Hometap’s Mission
Hometap Reviews Trustpilot
Hometap was founded in 2017 by Charlie Vrettos, Andrew Vassallo, Jeffrey Glass, and Max Campion.
The company’s goal was to help the average American benefit from their most valuable physical asset: their home.
It does this by allowing homeowners a different, easier way to access the equity in their homes instead of borrowing against it.
Unlike with lenders, the company doesn’t give you a loan against the equity of your home that you have to pay back.
Instead, it makes a home equity investment, so it benefits from rising house values along with you.
You retain ownership of your home, get money, and have a 10-year term to pay back the Hometap investment by buying it out.
HomeTap is headquartered in Boston, Massachusetts, but helps homeowners in 14 states.
It’s been named as the Best real estate Startup in Boston by investment website Benzinga, and has raised more than $100 million from investors who believe in its innovative business model.
How Hometap Works
Before we dive into how Hometap works, note that the company only serves homeowners in Arizona, California, Florida, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Virginia, and Washington.
However, this section on Hometap reviews cover the following:
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 $600,000)
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 30% of your home’s current worth, up to $600,000.
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.
Third Party Appraisal
Once you receive the investment proposal, a Hometap investment manager will call to discuss it with you and answer any questions you may have.
If you decide to move forward, you will complete a short online application, and Hometap schedules a third-party appraisal of your property.
After the third party home appraisal, the investment deal can be finalized.
Signing Closing Documents
After electronically signing the paperwork, the closing date is set, and after four days, the funds are wired to your bank account.
Hometap takes care of filing all the required documents to show Hometap’s share and ownership stake by creating a lien on the property.
Benefits of Using Hometap
There are benefits to working with a home equity investment firm such as Hometap.
First and foremost, this is a way to access the equity in your home without having to take on more debt.
You do not make monthly payments to Hometap, and the investment does not accrue interest.
However, 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.
Downsides of Using Hometap
As is the case with any home equity financing option, homeowners should carefully consider their situation and needs to determine the best option for accessing the equity in their home.
Hometap is a relatively easy way to accomplish this, but it may not be right for all homeowners.
There are a few drawbacks to using Hometap. Our Hometap reviews cover some of them, 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 years 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.
Limited Number of Locations
The first consideration is whether or not you live in the states where Hometap is licensed. The company can currently work with homeowners in:
‣ Arizona
‣ California
‣ Florida
‣ Maryland
‣ Massachusetts
‣ Michigan
‣ Minnesota
‣ New Jersey
‣ New York
‣ North Carolina
‣ Oregon
‣ Virginia
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Hometap’s Mission
Hometap reviews cover Hometap’s mission. This is based on homeowners succeeding in managing their finances, staying in their homes, and working to increase their property value.
The money the company makes is at the end of that investment term at the time of sale.
They receive payment for their ownership stake in the home along with an agreed-upon percentage of the home’s total current value.
There are some exclusions in this calculation.
For instance, if you renovate your home after the investment, the renovation value may be deducted from the home’s current appraised value before determining the final payout to Hometap.
Again, each situation is unique, and it’s best to contact your Hometap investment manager to discuss your plans and how it will affect your final settlement.
Conclusion
Although Hometap is a relatively new platform, as is its mode of operation, this does not preclude it from being a viable option for accessing home equity.
If you don’t want to deal with the monthly obligations associated with personal loans, Hometap is an excellent choice.
However, before you commit to anything, make sure you’ve done your homework. Understand the platform’s operations inside and out to avoid future regrets.
With our Hometap reviews, you can quickly determine whether the platform meets your requirements and if it is the solution you seek.
Overall, the platform appears to be an excellent choice.
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