Have you ever wanted to renovate your home, pay off debt, buy a second property, fund a college education for a child, or just have money available for whatever you need? You might be considering pulling cash out of your home equity, but don't assume that a home equity loan, reverse mortgage, cash-out refinance, or home equity line of credit (HELOC) are your only options.
You may want to consider co-investing in an equity share agreement instead. In this article, we'll walk through how Hometap and Unison work, evaluate how both companies excel, go over the important differences between Hometap vs. Unison, and help you choose the right home equity option for you.
Hometap vs. Unison
|Equity amount available||Up to $600,000 or 30% of your home’s value||Up to $500,000 or 17.5% of your home’s value|
|Fees||3% of investment plus signing costs
13.9% to 16.7% of the home’s appraised value at settlement, sale, or refinancing
|3% origination fee
20% to 70% of the home’s change in value at settlement
|Term||Up to 10 years||Up to 30 years|
|Max loan-to-value ratio (LTV)||75%||75%|
|Credit score needed to qualify||500||620|
|Visit Hometap||Visit Unison|
How does Hometap work?
Hometap, a home equity sharing agreement, doesn't require homeowners to take out a loan to access their home equity. Instead, you can exchange your equity for payment now, and Hometap will take a share of the home's future value. You can settle your investment any time within the next 10 years.
Hometap doesn't dictate what you can or can't do with the home as long as the mortgage, taxes, and insurance are paid. If you have home renovations you want to complete, you still could.
Let's say you realize that your home, which is valued at $200,000, needs a comprehensive renovation. Hometap agrees to pay you an agreed-upon amount of your current appraised value. The company sends you the money (after deducting 3% in closing fees, including appraisal fees, title charges, and government recording and transfer charges) as a lump sum soon after closing. You can request up to 30% of your home's value (up to $600,000), depending on how much money you need.
You can do whatever you want with the money, including financing home improvement projects, buying a new car, or funding a child’s college education.
Hometap will evaluate your credit, income, and property to determine whether you qualify. It allows a range of real estate including primary residences, vacation homes, and rental properties.
You must settle Hometap’s investment within 10 years. You could pay off Hometap with savings, take out a loan, or sell your home. Hometap gets a percentage of your new home value when you sell. If your home value happens to go down instead of up, Hometap shares in the depreciation as well. Hometap also has no prepayment penalties.
Hometap is available to residents in the following states: Arizona, California, Florida, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Virginia, and Washington.
Learn more in our Hometap review.
How does Unison work?
Unison co-invests in your home by giving you cash in the form of an equity withdrawal. Instead of paying interest or making monthly payments as you would with a home equity loan, you share a portion of your home’s value with Unison when you decide to sell your home. As with Hometap, you can still do renovations to your home if you choose.
Let's say you bought a property for $200,000, and it's worth $250,000 when you sell it 30 years later. Unison would take a percentage share of the future appreciation. On the other hand, if your property is only worth $190,000 when you sell, Unison would share in the $10,000 loss.
Unison works with individuals who live in the following states: Arizona, California, Colorado, Delaware, Florida, Illinois, Indiana, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, Washington, D.C., and Wisconsin.
Unison will also evaluate your credit, income, and property to make sure you qualify and can handle the eventual repayment. The home must be your primary residence (rental properties may experience more wear and tear, lowering the home value) and you must meet other specific criteria for Unison to invest in your property.
After 30 years, you must sell your home or buy Unison out. You must pay back an amount equal to the original investment plus or minus Unison's share of the home's change in value.
What both home equity companies excel at
Hometap and Unison have several things in common. For example, neither company requires ongoing payments like a traditional home equity loan or HELOC.
They also offer a few other perks:
- Both offer a quick and easy application process to learn your eligibility for a cash estimate.
- Both companies share in the gains only if the home goes up in value or when it is sold.
- You won't face restrictions on how to use the cash you get.
- You may qualify even if you have bad credit.
- Both companies accept different types of homes, from single-family homes to condos.
4 important differences between Hometap and Unison
Before you make a final decision about choosing between Hometap and Unison, consider these important differences:
- Different terms: Hometap offers a maximum period of 10 years, while Unison offers a maximum term of 30 years. When you sell your home or 30 years go by, your agreement with Unison ends.
- Credit score requirements differ: Hometap requires a 500 minimum credit score and Unison looks for a 620 credit score. A 500 credit score is considered a low credit score, while a 620 credit score is considered a fair credit score. Choosing one over the other might give you a better chance to qualify.
- State eligibility: Hometap only works with homeowners from 15 states, while Unison home buyers can live in one of 29 states, including Washington, D.C.
- Available equity amounts differ: Unison can invest up to $500,000, or 17.5% of your home’s value, while Hometap can invest up to $600,000, or 30% of your home’s value. The difference between the two may help you choose between one or the other.
Which home equity company should you choose?
What factors should you consider before choosing which investment company fits you best?
First, you'll want to decide if Hometap's shorter time frame of 10 years will meet your needs. Because this is a shorter time period than a standard 30-year mortgage, it could involve some risk. At the 10-year mark, you'll have to pay off your investment by buying Hometap out with savings, taking out a loan, or selling your home. On the other hand, Unison doesn't require you to sell your home or buy the company out until 30 years have passed.
Here's how this could work out in each scenario:
Let's say you own a property with a current market value of $500,000. With Hometap, you could unlock a shared equity investment of up to $150,000 (30% of the current market value). Let’s say you decide just to borrow $87,500 and Hometap agrees to take a 16.7% share of your home’s value when you settle. You sell your home for $600,000 in 10 years. You'll repay 16.7% of your home’s value at settlement ($600,000 x .167 = $16,700), for a total of $100,200.
With Unison, let's say you buy a house valued at $500,000. You could unlock up to a maximum of $87,500. Unison also reduces your home’s appraised value by 2.5% to find your home’s original agreed value, which is $487,500.
Let's say that you sell your home for $587,500 for a profit of $100,000 down the road. Of that amount, Unison gets 70% ($100,000 x 0.70 = $70,000). Unison’s share of your appreciation or depreciation varies depending on its original payment amount. Your overall payment, in this case would be $157,500 (your original payment of $87,500 with Unison plus its $70,000 share of the appreciation).
|Initial value of your home||$500,000||$500,000|
|Home’s original agreed value||$500,000||$487,500|
|You sell your home for||$600,000||$587,500|
|Your home appreciated by||$100,000||$100,000|
Other home equity options
Do you think you're more suited to a traditional home equity product, such as a HELOC or home equity loan? If you're nervous about coming up with the money to pay back the entire investment and a percentage of your home’s appreciation at the end of the term period, you may want to stick to a traditional home loan option.
A home equity loan, also known as a second mortgage, lets you borrow from your home equity by getting a loan secured by your property that you can use in any way you want. However, you have to pay the loan back after you borrow, with interest.
A HELOC, on the other hand, allows borrowers to access their home's equity using the home as collateral for a line of credit. You only need to borrow what you need as you need it. As you repay your outstanding balance, your credit available is replenished up to a specific amount with interest. It's a revolving line of credit and works a lot like a credit card.
If you're 62 or older, you may also consider a reverse mortgage. A reverse mortgage is a loan in which you borrow from the equity in your home as long as you live in the home as your primary residence. Your lender makes payments to you, and you no longer need to make mortgage payments, which is why it's called a "reverse mortgage." You must still pay homeowners insurance and property taxes.
Since a reverse mortgage is a loan, your heirs pay back the reverse mortgage when you die, or you pay the reverse mortgage company back when you leave the home or move away. This means your heirs could receive less inheritance, and you may run the risk of taking a reverse mortgage out too early in your retirement years.
Learn more about how to get a loan to help you decide between a home equity loan, HELOC, reverse mortgage, and shared appreciation companies.
Is Hometap a legitimate company?
Hometap is a legitimate company. Of 777 reviews on Trustpilot, 91% of those who reviewed the company gave it an excellent rating. Hometap has also been accredited by the Better Business Bureau (BBB) since 2019.
Is Unison a legitimate company?
Unison is a legitimate company. Unison has been accredited by the BBB since 2013. Of the 34 current reviews on Trustpilot, 75% of clients gave the company an excellent rating.
What is the minimum payment for Hometap?
You'll pay 3% of your investment amount plus signing costs for Hometap. Hometap will give you an investment estimate, which includes estimated terms specific to your property. A Hometap investment manager can talk you through the numbers after you complete an investment inquiry online.
Cash-strapped but leery about taking out a reverse mortgage, second mortgage, or a HELOC? You may want to consider Hometap or Unison, which offer a twist on tapping into home equity. A shared appreciation equity agreement means you pay back the agreed on share of your home’s value when you settle the investment.
In short, both Hometap and Unison offer investment opportunities — not a loan that you have to shell out for while you're already paying on one mortgage. While that may be helpful, keep in mind that you may have a difficult time getting a refinance down the road because you have financing from Hometap or Unison. If you plan on refinancing, it’s best to do so before entering a home equity agreement.
It's important to review each comprehensive estimate from either Hometap or Unison before you jump in. Each company will detail how much equity you can tap into, the fees for each, and the amounts you'll need to pay when your term expires.