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Hometap Review: Can This Innovative HELOC Alternative Save You Money?

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Traditionally, using your home equity to get cash meant taking out a loan or credit line. Although useful, these debt products involve monthly payments towards the loan’s principal and interest.

But a new option has emerged, with a handful of companies investing in home equity rather than lending on it. This allows homeowners to leverage their equity for cash without adding another monthly payment.

One such company is Hometap, which will give you funds upfront for a cut of your home’s future value. 

Read our full Hometap review below to see if it’s a wise financial decision for you.

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Hometap gives you cash upfront for a share of your home's value after 10 years. In some cases, this can save you money compared to a home equity line of credit. And if your home declines in value, you can even end up with a net gain. In other cases, however, it can be significantly more expensive than alternative options, so it's important to carefully consider and understand the potential costs.

Pros:
  • No monthly payment.
  • Fast and easy application process.
  • Getting an offer doesn't affect your credit.
Cons:
  • Cost can be high if your home's value appreciates significantly.
  • There's a forced sale risk if you're unable to pay Hometap after 10 years.

Hometap Basics: How it Works

Hometap lets you tap into your home equity for cash without taking on a monthly loan payment.

To do this, the company invests an agreed-upon amount in your home in exchange for that proportion of its future value.

This is not a home equity loan. When you sell your home, you pay this percentage of the sale price back to Hometap. 

Think of it as though your home is a stock in which Hometap invests.

Imagine you have a $100,000 home and strike a deal with Hometap to secure $15,000 in upfront funds. Then, 10 years later, you sell that home. 

Below are three potential outcomes of that situation based on various hypothetical housing markets:

Future Home ValueHometap Share Amount
3% annual appreciation:$134,392$33,598
5% annual appreciation:$162,889$40,722
10% total depreciation:$90,000$18,750

Hometap investments have maximum terms of 10 years. If you don’t sell your home within that time frame, you’ll pay back the initial investment (based on your home’s appraised value 10 years from the date of the investment) through another source of funds, such as your savings or a home equity loan.

Hometap Interest Rates

There are no interest payments or monthly fees with Hometap. As such, you don’t need to concern yourself with interest rates, as you would with a standard HELOC.

However, it should go without saying that Hometap is not a free service. 

As noted in the previous section, you agree to pay Hometap a portion of your home’s future value. So when calculating the costs of this arrangement, you have to think about how much you’ll owe relative to the amount you received, not the total proceeds. 

Continuing our previous example, let’s say your home is worth $100,000 today and you use Hometap to secure $15,000 in upfront funding. 

If your home appreciated by 3% a year for 10 years, its total value would be $134,392. In that case, you’d owe Hometap $33,598 (based on their on-site calculator). 

While you don’t pay interest to Hometap, we can calculate the equivalent annual interest rate on a $15,000 loan that amounts to $33,598 paid back in 10 years: 

Equivalent Interest Rate
3% annual appreciation:8.40%
5% annual appreciation:10.50%
10% total depreciation:2.26%

Hometap Costs and Fees

In addition to costs outlined above, there are a few fees to be aware of.

For one, Hometap charges 3% of your investment amount — taken out of your initial proceeds — as a closing fee. 

Note: we included this 3% figure in our calculations above. 

You also have to factor in the following fees (which are not included in our example, as the specific numbers can vary):

  • Home appraisal: $300 to $450, on average.
  • Title charge: about $700 to $800, on average.
  • Government filing: about $350 to $1,000, on average.

Hometap vs. Home Equity Line

Let’s go back to our $100,000 home example. But this time, let’s say we got a home equity loan for $15,000 with a 7% fixed interest rate. 

Here’s how that breaks down:

  • Initial home value: $100,000
  • Loan amount: $15,000
  • Loan interest rate (based on Hometap’s estimate): 7%
  • Monthly payment: $174
  • Total paid at the end of 10-year term: $20,900

As you can see, assuming the home appreciates in value, a home equity loan is the less expensive choice. Of course, this assumes you can qualify for a home equity loan and make the required monthly payments. 

Many homeowners who are interested in home equity sharing cannot qualify for such a loan and would otherwise turn to credit cards (or other loan alternatives), where interest rates can be well above 10%.

What About Renovations?

Hometap doesn’t share in any home value changes directly attributable to renovations.

That means if your home value increases by $25,000 or more due to renovations, you can request that Hometap give you a renovation adjustment to exclude that figure from their settlement calculation. 

To do this, you’ll need to get a new property appraisal. You’ll also need to hold onto receipts associated with (and photographs of) the renovations.

Let’s look at an example

Say you have the same $100,000 house from our earlier calculations, and you get $15,000 from Hometap. Your home appreciates to $162,889 due to market forces over 10 years. However, you also renovate your kitchen, which adds another $30,000 to your home’s value. The market value of your home now sits at $192,889.

You would then request a renovation adjustment from Hometap at the time of settlement, provide the necessary evidence, and get your property appraised. 

Your $30,000 renovation appreciation would be excluded from the final calculation, so Hometap’s share is based on $162,889, not $192,889.

Note that if your renovations do not result in at least $25,000 in additional value, they will not be excluded from the agreement.

Application Process and Eligibility

The process for getting cash from Hometap is fairly straightforward.

First, you request an estimate to see if you pre-qualify. They’ll ask for some information about you and your property. This part takes a minute at most.

Hometap will then prepare an investment estimate using your information. You’ll also gain access to a dedicated investment manager to help you along.

If you like the terms Hometap provides, you’ll fill out a short online application. After that, Hometap orders an appraisal of your home and uses the appraised value to put together your final offer. 

Accept the offer, schedule the closing, close on the deal, and Hometap wires your funds to your bank account within a few days.

To qualify, you must own a single-family home or a condominium in a state Hometap operates in. 

Hometap is available in the following states as of August 29, 2022:

  • Arizona
  • California
  • Florida
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • Nevada
  • New Jersey
  • New York
  • North Carolina
  • Ohio
  • Oregon
  • Pennsylvania
  • South Carolina
  • Utah
  • Virginia
  • Washington (State)

Hometap doesn’t have hard requirements for credit score or equity because they evaluate each property independently. However, most of their applicants have scores of at least 600 and hold 25% or more equity in their property. Shoot for those numbers to get better offers.

How Much Cash You Can Get

Hometap lets you borrow up to 30% of your home’s value, with a maximum dollar figure of $600,000. 

The percentage of your home’s value you will receive depends on your credit score and current equity in the property.

To determine your home’s value, Hometap sends a third-party appraisal company to your home. Upon settling the investment, Hometap sends another appraiser to determine the final value.

By using third-party appraisers both times, Hometap minimizes the potential conflict of interest of under-appraising the property to claim more appreciation.

Hometap Pros and Cons

Let’s look at the highlights and drawbacks of Hometap.

Hometap Pros

  • No monthly payment. You receive cash without constricting your budget.
  • Downside protection. If your home has depreciated when you settle your investment, you may come out far ahead of what a traditional HELOC would cost you. 
  • Fast process. The application takes under 10 minutes, and you can receive funding in as little as two weeks.
  • No firm credit requirement. Hometap says that most of their successful applicants have a credit score over 600, but they don’t have a hard minimum to qualify.
  • No credit impact. Hometap doesn’t conduct a hard inquiry, protecting your credit.

Hometap Cons

  • 10-year limit. If you don’t sell your home in 10 years, you’ll have to pay back the investment with another source of funds (such as your savings). Long-term homeowners should be careful.
  • Forced sale risk. If you can’t pay back the invested amount when the term is up, you could be forced to sell your home.
  • Increased payout from your home’s appreciation. If your home substantially increases in value, you’ll end up paying a very big percentage relative to how much money you received upfront.
  • Availability. Not available in all states.

Hometap Competitors and Alternatives

Hometap has two main competitors.

  • Point. Point offers much longer terms of 30 years (which could be positive or negative depending on how you use your funds), with servicing fees ranging from 3% to 5%. You can access up to $500,000, depending on your home’s value and your equity.
  • Unison. Unison also offers 30 year-terms, but the servicing fee is higher than Hometap’s at 3.9%. They cap the amount of cash you can receive at $500,000, but you can only receive up to 17.5% of your home’s value.

Learn more in our roundup of the best home equity sharing companies.

Key Questions About Hometap

What happens if your home declines in value?

You still pay the agreed upon percentage of your home’s value. That means you’d owe Hometap less than what they invested, resulting in a net gain for you.

Does the “sale” of equity in your home trigger capital gains tax?

Hometap’s investments are designed to be tax-deferred, so pending an unusual circumstance, you won’t owe taxes as a result of receiving an investment.

The impact of a Hometap investment on your taxes in connection with a settlement of the investment and/or a sale of your home will depend upon your specific facts and circumstances.

What happens if your home enters foreclosure?

You’re still responsible for paying back the full amount of money you owe Hometap.

What happens if you die? 

If you’re the sole homeowner, the obligation to Hometap passes to your estate and the lien stays on your property. If there’s a second homeowner, such as your spouse, the agreement doesn’t change.

What happens if you get a divorce from a co-owner? 

If you get divorced following a Hometap Investment, the investment remains in place and the terms are unchanged. If you seek to transfer ownership of the home prior to settling your investment, you have to work with the company to coordinate on any such transfer of ownership.

My Hometap Analysis and Final Thoughts

Home equity share agreements are a very new way of thinking about using your home equity for the ability to obtain cash. 

There are two things at play here:

  1. There’s the idea that using a home equity sharing company like Hometap is advantageous to using a home equity loan. This aspect is covered above. 
  2. The impact this would have on you long-term. In other words, what is the opportunity cost of foregoing an equity stake in your home?

The rate of return one can expect on a home is between 8.6% and 10% per year. This isn’t as high as stocks, but it’s good. 

Also, your mortgage is the one bill that always gets paid every month, no matter what. Homeowners do whatever it takes to pay their mortgage, because the consequences of not doing so are severe. 

These are the reasons why, for the majority of households, their primary residence is their largest asset

So if you give up an equity stake in your home, what’s your alternative plan to save money over the long-term? Is it a 401(K)? An IRA? An HSA? 

Those are legitimate alternatives. And if a home equity share agreement frees up cash flow so you can increase how much you’re saving in these accounts, going with a company like Hometap can make sense. 

With that said, I’d stay away from an option like this if your finances are tight and the home equity share would be used as a last resort (i.e., because you can’t afford the monthly payments a home equity loan would bring). 

This might give you some short-term relief, but over the long-term, for households that haven’t been able to save much and don’t have an emergency fund, giving up a percentage of their home equity limits the upside of the one asset most non-savers actually do have.

Learn more about Hometap.

R.J. Weiss
R.J. Weiss is the founder and editor of The Ways To Wealth, a Certified Financial Planner™, husband and father of three. He's spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.

27 Comments

  1. But if i have too much debt and can’t secure a HELOC OR Home Equity Loan to raise enough cash to pay off the debt(credit ~650, DTE ratio too high)what other option beside Home Equity Sharing is there?

    1. Unfortunately, most of the more attractive lending options are off the table. Hard to say without knowing your goals/situation but always goes back to cashflow. Consider any and all options for improving your income/expenses without the use of debt. Potentially, in a few months, you could get to a place where better lending terms open up.

  2. What happens if both owners die in the time frame of the contract in a equity share agreement. How does that work with and equity share company.

    1. Most often, debt is recouped from your estate when you pass. So, your heirs can either continue making payments as usual. If payments are not made, the home would then be foreclosed upon.

  3. Do you have to sell your home in 10 yrs, isn’t it possible to do a loan mod that paid off hometap and keep your home?

    1. Nope. You don’t need to sell your home, just repay Hometap. Most common way would be refinance the primary mortgage to pay them off.

  4. would I have to pay income taxes on a hometap investment loan?

    1. No. See FAQ:

      Hometap’s investments are designed to be tax-deferred, so pending an unusual circumstance, you won’t owe taxes as a result of receiving an investment.

      The impact of a Hometap investment on your taxes in connection with a settlement of the investment and/or a sale of your home will depend upon your specific facts and circumstances.

      ___

      Does that answer your question?

  5. can I pay off hometap earlier than 10 years? Lets say in 5 years, will they calculate repayment value based on appraisal at 5 year?

    1. Hi CP.

      That’s correct. It’s whatever your home is appraised at at the time of payoff, whether that’s two years or ten years.

  6. I need some clarification on the math please. If my home is worth 325k and Hometap gives me 30% that is 97k and the fees come out for appraisal ,title filing instead of out of pocket correct ? If I sell or refinance and my house and new value is 375k ….home tap would receive 30% of 375k which is 112,500k. Is this their total ? The initial 97k + their profit of 15k ? trying to understand breakdown .Some of these companies give a percentage ( ex:10% current value of 325k = 32,500 ) but take a higher amount ( 16 % of new value 375k = 60k) which is almost 50% more of initial investment, very confusing and if they are almost doubling their investment that is not worth it to me. Just wish these companies would be clear and transparent with this information.Thanks!

  7. Hi DM,

    Good questions.

    The fees come out of the $97,000 you’d receive, not paid separately out of pocket. So, you’d pay an estimated $2,910 in upfront costs, e.g. only get $94,090

    Hometap then takes a percentage of the total home value at the time you close down your agreement. You only know this number, however, once you’ve gone through the application process. This means you may get all the way through underwriting to not be happy with this agreed upon amount. Agree, that I wish these things were simpler and more clear.

  8. What kinds of things are on the application? Will they want bank statements and other documents a traditional line of credit would?

    1. Yes, it’s going to be similar to applying for a home equity line/HELOC with the required paperwork.

  9. What happens if I decide to move from the home I have the Hometap agreement for? Does the agreement simply stay in place? It may be a possibility that I would not stay here forever, but would like the option to rent my home out and move at some point. Thanks so much for what you do, your help is fantastic.

    1. Hi Renee,

      If you decide to move prior to 10 years, Hometap will receive its share at closing, similar to how you’d pay off a second lien during closing.

  10. Great Article. I found that after receiving final approval and after reading the terms of closing documents, in order for home tap to protect their small investment in my property, I would have to give up a lot of my majority owner rights. In exchange for the 15% value that we are being given, in 10 yrs we are giving them 20-27%. of our home value. In addition, we have to get approvals from home tap to make renovations or add new liens or loans secured by the property and if you default on your mortgage or insurance, you have 30 days to cure it or else they have cause to take hold of your property. I have discovered a lot of cons in the closing documents that are. making me reconsider doing it. In theory, it seems like a good idea, but not at the cost of me giving up my owner rights.

  11. Your analysis doesn’t show the real costs and makes this seem more attractive than it really is. Hometaps ownership is many points higher than the percentage of loan to home value and ratchets up from 3.3% to over 13% in extra ownership of the home.

    Using their own calculator;
    On a 5% loan, hometap owns 8.3% of you home value (3.3% premium)
    On a 6% loan, hometap owns 10% of you home value (4% premium)
    On a 7% loan, hometap owns 11.6 of you home value (4.6% premium)
    On a 10% loan, hometap owns 16.7% of you home value (6.7% premium)
    On a 20% loan, hometap owns 33% of you home value (13.3% premium)

    This yields vastly different final costs than your example to the point of al most misleading.

    This actual costs in your example of a $100,000 home, $20,000 loan, appreciating to $130,000 are 59% higher than you show. (Hometaps ownership is $41,166 vs $26,000 your show)

    While this may still be a viable loan option for people, more realistic final costs should be provided, unless the intent is merely to advertise for hometap.

    1. Thanks, William.

      We did the math before your comment by using a simplified example that didn’t include fees while mentioning these fees later in the article. In hindsight, that was the wrong way to approach it. We updated the article to include calculations of fees upfront, so as not to steer anyone in the wrong direction.

      Good comment and thank you!

  12. Is the term “Vacation Home” apply to any secondary home including rentals?

    1. Hi Ricard,

      When we originally published this draft Hometap only did primary residence.

      They will now do primary residences, vacation homes, rental properties, multi-family homes and condos.

  13. How is this better than a Reverse Mortgage? It appears there are alot of upfront costs for appraisals plural, closing costs, title company fees, etc. How do those get paid?

    1. Reverse mortgages typically pay you a monthly “income” instead of an upfront sum. This structure makes them more popular with retirees who need to supplement their monthly income.

      In home equity sharing, you’re getting an upfront sum with no monthly payments going forward, yet the “bill” comes due at the end when you sell or refinance. This structure makes them more popular for those turned down by traditional banks for financing.

      One isn’t necessarily better than the other. Comes down to your goals and options.

      Hope that helps!

  14. My wife and I are considering this to finish off some big projects on out home, before we sell in 3 years and move. Is this worth borrowing 15k for a 150k home to finish these projects if our home only increases in value 10k or so?

    1. If I understand your questions correctly, it’s not worth borrowing $15K and paying associated fees with HomeTap for only increasing your home’s value by $10K.

      Did you mean the opposite? Borrowing $10K for a potential $15K appreciation?

  15. I just went through the process with Hometap and ended up switching to Unlock before closing. There are a few misunderstandings here, also some good information. Hometap’s share on a 12% investment in your home is 24% of the total appraised home value at the end of the agreement when you buy them out. That’s a hefty chunk to fork over, however if you compare to payments and interest on a HELOC or cash-out refi over the same time period, the HEA is often only slightly more total. The obvious benefit is it’s easy to qualify for and no payments. Unlock is slightly less expensive at 22%, plus it allows partial buy-outs. And if you can afford to buy them out in the first three years, it’s not a bad deal. Terms are a little better at Unlock, customer service is a little better at Hometap. Neither look at income and bank statements were not requested for me. They do look at credit score and it may impact final terms, but it’s much more lenient than conventional equity loans. Ending vs. starting appraisals have a big impact. If you don’t have regular monthly income and a great credit score it’s a reasonable option. It’s also not reported to credit bureaus which may also be a benefit.

    1. Appreciate your insights, Diana. Thanks for sharing your experience.

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