You might be considering tapping your home equity to help pay off debt, fund a business, improve cash flow, or pay for home improvements. However, you might be reluctant to do so because you don't want another monthly payment.
To address these concerns, home equity investment companies are offering ways to tap into your equity without requiring monthly payments. Learn how it works and how Hometap vs. Point match up so you can decide if a home equity investment is right for you.
Hometap vs. Point
Here’s an overview of how Hometap compares to Point.
|Equity amount available||Maximum of $600,000
Up to 30% of your home's value
|Maximum of $500,000
Up to 20% of your home’s value
|Fees||3% of investment plus third-party fees, including the cost of a home appraisal||3%-5% of investment plus the cost of a home appraisal|
|Term||Up to 10 years||Up to 30 years|
|Max loan-to-value ratio (LTV)||75%||Less than 80% (Must have enough equity in the home to retain 20% after Point’s investment)|
|Credit score needed to qualify||500||
How does Hometap work?
Hometap invests in your home by buying a piece of your home's equity. Your home’s equity is the value of your home, less the balance of your mortgage. If your home is valued at $250,000 and you owe $200,000 on your mortgage, you have $50,000 in equity.
After deducting costs, Hometap will loan you a lump sum today and share a portion of your home's growth in value over time. You have up to 10 years to repay the loan from savings, the sale of your home, or by taking out another loan. You can pay off the loan at any time during the investment term with no prepayment penalty.
During the period before you repay Hometap, there are no payments required, and there is no interest owed on the amount received from Hometap. If you need additional money and meet Hometap’s approval criteria, it is possible to request additional funding.
When you settle with Hometap, you pay Hometap a percentage of the home’s value at that time to buy out its investment. If you sell the home, Hometap uses the sales price to determine the amount it receives. You'll need a new appraisal to determine the value of the home if you repay from savings or by taking out a new loan. For homes that have lost value during the effective period, Hometap gets repaid less. If your home appreciates significantly, Hometap caps its share at an annual appreciation rate of 20%.
For more detailed information about how its program works, read our Hometap review.
How does Point work?
Point is another home equity company that provides cash in exchange for equity. It also deducts the costs of the transaction from the proceeds, so there are no out-of-pocket costs for the homeowner. You have up to 30 years to repay the loan, which you can do by selling your home, using savings, or taking out another loan by the end of the term.
After receiving the equity, you aren’t required to make any payments to Point. You can pay off the loan at any time during the investment term with no prepayment penalty. Point does not charge any interest, and there are no additional fees unless you change the title on your home, refinance it, or pay it off.
Point reduces your home's starting value by 15% to 20% of the appraised value at the start of your loan term. Your repayment amount is based on the home’s market value when you decide to repay Point.
If your home’s value appreciates, you will need to pay back the amount you borrowed plus 25% to 40% of your home’s appreciation. Point calculates the repayment share during underwriting. It also caps how much it will share if your home’s value appreciates by a large amount, and if your home depreciates, you pay back less.
What both home equity investment companies excel at
Both of these home equity sharing investment companies offer attractive benefits to homeowners. These are a few of the ways that both can be a smart choice:
- Access to equity with no loan. You don't need to borrow money or sell your home to access your home's equity.
- No payments are required for at least 10 years. During the period between when you receive funds and you settle with the company, you do not need to make any monthly payments. This allows you to focus on paying off other debts or contributing to your investment accounts, like your 401(k) or IRA.
- Bad credit is accepted. Homeowners with credit scores as low as 500 could qualify to participate in these programs.
- Take less money if your home declines in value. You'll pay back less if your home experiences depreciation during the effective period.
- Online calculators. Both Hometap and Point offer calculators to show you how much equity you might be able to access.
6 important differences between Hometap and Point
While their basic service is very similar, there are some distinct differences when comparing Hometap vs. Point.
- Term of contract. Hometap has a 10-year term, while Point has a 30-year term, providing more time for homebuyers to repay the money.
- Ability to borrow additional money. Hometap allows you to sell additional equity if you need more money at a later date. Point does not provide this option.
- Maximum investment amount. You can get up to $600,000 from Hometap, while Point has a maximum of $500,000. Hometap lets you sell up to 30% of your home's value, while Point requires that you retain at least 20% equity after they purchase their stake.
- Repayment models. To settle with Hometap, you repay a share of your home’s value at the time you settle. To settle with Point, you repay the amount loaned plus a share of your home’s appreciation at the time you settle.
- Transaction fees. The fees for Hometap are 3% plus closing costs, while Point charges 3% to 5% plus closing costs.
- Availability. Hometap is available in 15 states, while Point is available in 17 states. Hometap is available in Arizona, California, Florida, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Virginia, and Washington. Point is available in Arizona, California, Colorado, the District of Columbia, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Virginia, and Washington.
Which home equity investment company should you choose?
When deciding between Hometap vs. Point, the biggest factor is the timeframe in which you need the product. Hometap must be repaid within 10 years of selling your equity, while Point provides up to 30 years. Both programs have a maximum amount of at least $500,000, which will cover most homeowners' equity requests.
Hometap is best for homeowners who don't plan on being in their home for very long. With a maximum 10-year horizon, homeowners who are looking to sell or pay off the investment within a decade are ideal candidates. Examples of ideal homeowners could be those close to retirement or parents whose children are leaving for college.
Point offers a longer timeframe, so its product may apply to a wider variety of homeownership scenarios. The 30-year timeframe closely matches the typical mortgage term of most homebuyers. When your mortgage is paid off, you should have substantial equity in which to pay off Point and have money for retirement or your next home.
Retirees may also be interested in this product since its term may outlive them. The repayment would come out of their estate so that it doesn't affect their finances while alive.
To better understand the differences between Hometap and Point, let’s look at a homeowner with a home valued at $500,000 who wants to borrow $75,000. When they’re ready to settle their loan, the home’s value has increased to $600,000.
|Initial value of your home||$500,000||$500,000|
|Home’s baseline value||$500,000||$420,000|
|You sell your home for||$600,000||$600,000|
|Your home appreciated by||$100,000||$180,000|
The amount you owe to Hometap is less than Point because Hometap has you repay a share of the home’s value when you settle. In this example, you pay Hometap 16.7% of your home’s $600,000 value at settlement, which is $100,200.
With Point, you repay the amount you borrowed plus a share of the home’s appreciation. So, $75,000 (the amount you borrowed) plus 30% of $180,000 (the home’s appreciation) which is $54,000 for a total of $129,000. This is almost 29% more than Hometap in this example. Other scenarios with different borrowing and appreciation values may vary.
Other options to consider
Now that you know the similarities and differences of Hometap vs. Point, you may still be unsure about selling a portion of your home's equity. As a homeowner, you have other options that might be a better fit for your financial situation. The best mortgage lenders can explain which options are available for your home. Here are a few of the most common choices:
- Downsizing. Homeowners who want to tap their equity without increasing their monthly payments may choose to downsize their homes. They can accomplish this by selling their current home and buying a smaller home or moving to a lower-cost area. This is an ideal option for retirees or parents whose children have moved out.
- Cash-out refinancing. Homeowners can refinance their homes and pull additional cash out by getting a new mortgage for an amount that’s higher than their current mortgage balance. This increases the loan amount, but payments might be the same or lower by resetting the 30-year term and locking in a lower interest rate. Speaking with a mortgage broker to show you how to get a loan through a cash-out refi could be the perfect choice for homeowners with a high interest rate mortgage.
- Taking out a HELOC. Home equity lines of credit provide renewable access to your home's equity. HELOCs act like a credit card where draws reduce your available credit and payments restore your ability to borrow again. Plus, you only pay interest on the amount borrowed. HELOCs could be a great option for homeowners who are unsure of how much they need to borrow and want the flexibility of interest-only payments.
- Using a home equity loan. A home equity loan is a one-time loan against your equity that is repaid over a specified period of time. Interest rates and monthly payments are generally fixed for the life of the loan. Home equity loans could be the best option for homeowners who want a simple monthly payment and defined payoff period.
- Taking out a reverse mortgage. A reverse mortgage helps homeowners age 62 and older access their equity. The homeowner receives payments based on their home equity and no longer needs to make mortgage payments. You repay the loan once you are no longer living in the home.
What credit score do you need for Hometap?
Hometap requires a minimum credit score of 500 to be eligible for its program. Depending on the state, higher minimum scores may be required.
What are the monthly fees for Hometap?
There are no monthly fees when tapping your equity through Hometap. Hometap charges initial fees when it invests in your home, then there are no payments required until you sell or refinance your home. If you're still living in your home after 10 years, then you'll repay Hometap from your savings, by taking out a new loan, or by selling your home.
Is Hometap a good deal?
Hometap can be a good deal for homeowners who have sufficient equity in their home but don't want the monthly payments of a traditional loan. The company participates in the growth of your home's value without being involved in the day-to-day decisions of your home.
Tapping into your home’s equity can help you pay down high-interest debt, make home renovations, pay for college expenses, and more. Selling a portion of your equity is a unique approach to tapping a homeowner's equity.
For many homeowners, this solution can be appealing because it offers access to equity today without requiring monthly payments. With origination fees starting at 3% and forfeiting a percentage of your home's growth in value, this financing could be an expensive option.
Before making a decision on Hometap vs. Point, consider reading our HELOC or home equity loan comparison article. These options may be less expensive with lower upfront costs and without requiring that you share in your home's appreciation.
- Alternative to traditional home equity loans
- No loans or monthly payments
- Pay off debt or fund renovations
- Free home estimate