Hometap provides home equity investments, allowing homeowners to receive cash now in exchange for giving the company a share of the home’s future value. That means you can tap into your equity without taking on monthly payments or interest. Its home equity investments can reach as much as $600,000 and come with 10-year terms.
The application process begins online and follows a few basic steps.
Who can qualify for Hometap?
Homeowners with a FICO score of at least 575 and at least 25% equity in their property may be eligible for a home equity sharing agreement with Hometap. Eligible properties include single-family homes, condos, vacation homes, rentals, one- to four-unit multifamily homes, and manufactured homes. The home must also be in one of the 27 states where Hometap operates.
Below is a quick summary of Hometap’s eligibility requirements.
What Hometap costs
There are no monthly payments or interest charges under Hometap’s agreement. Instead, the company’s cost depends on how much equity you sell and what your home is worth when you settle the deal.
You can sell up to 27% of your home’s value. Hometap limits its return at settlement to the equivalent of an 18.5% annual interest rate on the original lump sum. It also charges a 4.5% upfront fee on the total investment amount, with a maximum fee of $20,000.
Other closing-related expenses may also apply, including notary, recording, appraisal, and title insurance fees. These costs vary by location, and Hometap deducts them from your initial payout.
For example, if your home is valued at $400,000 and you sell Hometap a 10% stake worth $40,000, the company says its share would equal 18% of your home’s value if you settled after 6 to 10 years. The outcome would vary depending on whether your home declines by 4% or 8%, stays flat, or rises by 3.25% or 8% over 10 years.
Is Hometap legitimate?
Hometap, formally known as Hometap Homeownership Solutions, is a legitimate home investment company based in Boston. It was founded in 2017 and is accredited by the Better Business Bureau with a B+ rating. Its parent company is Hometap Equity Partners, LLC.
The company is licensed to offer home equity sharing agreements in 27 states across the U.S. The states it serves include 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 advantages and disadvantages
Hometap has both strengths and drawbacks, so it is worth weighing them carefully before signing an agreement.
Advantages
No monthly payments or interest charges.
Access to a large sum of cash, up to $600,000 if you have enough equity.
No need for a high credit score to qualify.
The company has nearly a decade of experience in home equity investing.
Disadvantages
Home equity sharing agreements are available in only 27 states.
Upfront fees can significantly reduce your payout.
If your home rises sharply in value, you may owe much more than you received.
You will need to make a sizable lump-sum payment when the agreement is settled.
How Hometap compares 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 also buys only up to 25% of a home’s value, compared with Hometap’s 27%, and it charges a higher upfront fee of 4.99% while operating in fewer states.
Point offers much longer terms than Hometap, up to 30 years. It also accepts credit scores as low as 500, operates in 32 states, and offers HELOCs. A HELOC may be a better fit if you are unsure how much you need to borrow or want continuing access to funds.
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