Hometap Overview: How It Works and Who Can Qualify

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Key Takeaways

• Hometap purchases a portion of your home equity now in return for a share of your home’s future value.

• When you settle, you repay a percentage of your home’s value at that time. If you sell a 10% stake, Hometap says the cost would equal 18% of your home’s future value if you settle the agreement in years 6-10.

• To be eligible, you need at least 25% equity, a 575 credit score, and a home in one of the 27 states where Hometap operates.

How Hometap works

Hometap provides home equity investments. In practice, that means it buys part of your home equity now in exchange for a slice of your home’s future value. Homeowners can convert equity into cash without monthly payments or interest. Hometap’s investments currently go up to $600,000 and come with 10-year terms.

Here is the online process for getting a home equity investment from Hometap:

1. Get an estimate. Enter your address so Hometap can check whether your property appears to be a good match.
2. Complete an online application. You will provide personal, financial, and property information. If approved, Hometap assigns an investment manager to guide you through the process and explain your offer.
3. Schedule a home appraisal. Hometap sends an appraiser to determine the value of your property.
4. Review the offer. If you agree with the terms, you sign and accept the investment offer.
5. Receive your funds. Hometap wires the money, and you can use it for any purpose.
6. Settle the agreement. When you choose to do so, or once the 10-year term ends, you pay Hometap the agreed-upon share of your home’s value.

Who can qualify for Hometap?

Homeowners with a FICO score of at least 575 and equity of 25% or more may qualify for a Hometap home equity sharing agreement. Eligible properties include single-family homes, condos, vacation homes, rental properties, one- to four-unit multifamily homes, and manufactured homes. The property must also be in one of the 27 states where Hometap operates.

Here is a summary of Hometap’s requirements:

How much does Hometap cost?

Hometap does not charge interest or require monthly payments under its agreement. Instead, the cost depends on how much equity you sell and your home’s value when you eventually settle the agreement.

The maximum equity stake you can sell to Hometap is 27%. The company limits what it can collect at settlement to the equivalent of an 18.5% annual interest rate on your original lump sum. Hometap also charges a 4.5% upfront fee on the total investment amount, with a cap of $20,000.

You will also pay fees for other services during closing, including notary, document recording, appraisal, and title insurance, among others. These costs vary by location, and Hometap deducts them from your initial payment.

For example, if your home is worth $400,000 and you sell Hometap a 10% stake, or $40,000, the company says its share would equal 18% of your home’s value if you settled in 6 to 10 years. The table below shows how the numbers change if your home depreciates by 4% or 8%, stays flat, or rises by 3.25% or 8% and you settle after 10 years.

Home equity sharing agreement sample repayment

Is Hometap legitimate?

Hometap, officially known as Hometap Homeownership Solutions, is a legitimate home investment company based in Boston. The company launched in 2017 and is accredited by the Better Business Bureau with a B+ rating. Its parent company is Hometap Equity Partners, LLC.

Hometap is licensed to offer home equity sharing agreements in 27 states across the U.S. The states it serves are Alabama, Arizona, California, Delaware, Florida, Georgia, Idaho, Indiana, Kentucky, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia, and Wisconsin.

Hometap pros and cons

Hometap comes with both advantages and trade-offs, so it is worth weighing both before signing an agreement.

Pros

• No monthly payments or interest charges.
• You may be able to access a large amount of cash, up to $600,000 if you have enough equity.
• You do not need a high credit score to qualify.
• The company has nearly a decade of experience in home equity investing.

Cons

• The agreements are only available in 27 states.
• Upfront fees can reduce how much money you receive.
• If your home gains significant value, you could owe much more than you received.
• You will face a large lump-sum payment when it is time to settle.

How does Hometap compare with Point and Splitero?

Point and Splitero also offer home equity investments, but Splitero’s maximum safety cap is 17.99%, which is lower than Hometap’s 18.5%. Splitero will buy up to 25% of your home’s value, compared with Hometap’s 27%. It also charges a higher upfront fee of 4.99% and operates in fewer locations.

Point offers terms that last much longer than Hometap’s, up to 30 years. It also requires only a 500 credit score, serves 32 states, and offers HELOCs. A HELOC may be a better choice if you are unsure how much you need to borrow or want ongoing access to cash.

Hometap FAQs

Is Hometap better than a HELOC?

Hometap may be a better option than a HELOC if you want to tap your home equity without taking out a loan, making monthly payments, or paying interest. But if you are unsure how much you need or want ongoing access to funds, a HELOC may be the better fit.

Is a Hometap investment a good idea?

A Hometap investment may make sense if you need a lump sum and want to avoid monthly payments and interest. Still, it is important to compare offers and run the numbers carefully. If your home rises sharply in value, you may end up paying the investor far more than you initially received.

What percentage does Hometap take?

Hometap’s percentages vary, but they will not exceed the equivalent of an 18.5% annual interest rate on the initial payment you receive. In addition, Hometap charges a 4.5% upfront fee, along with appraisal and other service fees tied to processing and signing the agreement.

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