Hometap Review: Can You Access Your Home Equity Without a Loan?

What is Hometap?

Hometap was founded in 2017 to help the average American benefit from their most valuable physical asset: their home. Available in 15 states, it allows homeowners a different, easier way to access the equity in their homes instead of borrowing against it.

With Hometap, the company invests in your property and at the end of a 10-year term, Hometap receives a share in the value of your home. This is different from a home equity loan, in which you’re borrowing against the value you’ve built up in your home and must pay that amount back to the lender with interest.

A Hometap investment allows you to retain ownership of your home, receive money for whatever expenses you wish, and have a 10-year term to pay back the Hometap investment by buying it out.

Hometap has won recognition including the 2024 Excellence in Customer Service Award from the Business Intelligence Group and inclusion in Fast Company’s World’s Most Innovative Companies in 2023.

Hometap at a glance

Equity amount available	Up to $600,000 (or 25% of home’s value)
Fees	3.5% of the investment amount Appraisal fees: $299 virtual; $500 to $1,000 in person Title charges: $800 to $1,200, additional costs based on the county may apply if your property is in New York state Government recording and transfer charges: $370 to $1,000
Term	10 years
Max loan-to-value ratio (LTV)	75%
Credit score needed	Minimum 500 FICO score
Prepayment penalty	None
Interest rate	N/A
	Visit Hometap

How does Hometap work?

Hometap offers an equity investment, rather than a home equity line of credit or home equity loan. You start the process by requesting an estimate of how much Hometap would be willing to invest in your property. Hometap will make a preliminary offer, then conduct a third-party home appraisal to see what your home is worth and how much money it’s willing to provide.

According to Hometap’s FAQs, If you accept the investment offer, you'll close on your transaction and receive wired funds within 4-7 days, and Hometap charges a 3.5% fee for its services.

There are also upfront costs including an appraisal fee and transfer taxes. This is taken out of the investment money you receive so you don't have any out-of-pocket costs in most cases.

You are allowed to use the money for anything you'd like. Unlike a traditional loan, you won't make monthly payments; it's an investment on Hometap's part. However, once you sign the papers and get your money, Hometap will have an ownership interest in your property and you'll eventually have to pay off that investment.

How Hometap makes money

You might be wondering why Hometap exists at all, if it’s not getting interest charges. Other than the 3.5% fee to get started, here’s how Hometap recoups its investment.

Hometap makes money by receiving a Hometap Share, which entitles the company to a percentage of what your house is worth at the time of settlement. It’s somewhat like owning a business and asking investors to become shareholders — their funds help you grow the business, but you have to give up a portion of any growth your business experiences over time.

So Hometap shares the risk of rising and falling property values. If home prices rise, the payment is higher and if they fall, it's lower.

The term for everyone’s HEI is 10 years, but you’re allowed to settle the investment sooner if you wish. Here’s how much Hometap receives, assuming your property increases in value:

• 15% if you settle in 0-3 years
• 17.8% if you settle in 4-6 years
• 20% if you settle in 7-10 years

Hometap is also entitled to 15% of the home’s value at the end of 10 years even if the value has decreased. This is only in the case of if your property depreciates. If your property appreciates, they’re entitled to the full 20%.

For example, if your home is worth $600,000 and Hometap invests $60,000, here’s an idea of what might happen assuming 2% annual growth for the following table:

Years until settled	Home value at end	Your share	Hometap’s share
3	$636,725	$541,216 (85%)	$95,509 (15%)
6	$675,697	$555,558 (82.2%)	$120,139 (17.8%)
10	$731,397	$585,117 (80%)	$146,279 (20%)

It’s also important to understand that if you took a Hometap investment that you could cash out 10% of your home’s value. In our example above, borrowing that $60,000 would cost you $146,279. That’s the same as taking a loan with a 24.38% annual interest rate.

Even though it might be easier to qualify for a Hometap investment than a loan, you should weigh your options before sacrificing 20% of your home’s equity. This is especially true if you live in a real estate market that is expected to grow rapidly. Instead, I’d likely look elsewhere for a more reasonable loan or tap into other avenues that would be cheaper than a 24% interest rate.

Some good news about the investment process: there's a 20% appreciation cap, which limits Hometap’s annual rate of return so you, the homeowner, don’t miss out on excessive gains in property value.

The major drawbacks to consider

While it makes sense that Hometap wants a cut of its investment and receiving a lump sum instead of a loan can sound appealing, it’s crucial to be aware of the potential risks before you agree to a home equity investment like this.

Risk of inability to repay the investment

First of all, you may experience what would normally be an awesome piece of news: your home’s value increasing drastically in the 10 years of your HEI with Hometap. Homeowners love to see the value of their property go up, but if you’ve taken funding through Hometap, the company is entitled to a percentage of that growth. Even though you don’t technically take out a “loan,” you do have to repay the money somehow at the end of the 10-year term.

I used Hometap’s basic calculator to plug in a home value of $400,000 and investment of $40,000, with varying rates of depreciation or appreciation. Here’s what’s estimated to happen after 10 years:

Growth or loss	Projected home value	Your share	Hometap’s share
+2% annually	$487,598	$390,078 (80%)	$97,520 (20%)
+5% annually	$651,558	$521,246 (80%)	$130,312 (20%)
-5% total	$380,000	$323,000 (85%)	$57,000 (15%)

As you can see, you still owe Hometap a fairly big chunk of change even if your property goes down in value. Plus, you might not be able to take out a home equity loan, refinance, or sell in order to do so.

And if the value of your home increases a moderate amount like 2% or 5% annually, just look at how much you would owe Hometap. In a sense you’re right back at square one, looking at a need to come up with a sizable amount of money all at once.

You may end up needing a HELOC or home equity loan anyway, to repay what Hometap invested in your property. Plus, you’ve lost out on much of the gains in property value, negating one of the benefits of homeownership.

Risk of not planning ahead for repayment

Along with the risk of too much property appreciation, you have to consider what Hometap requires of you. Yes, the lack of monthly payments may be nice right now. But what about 10 years down the road?

Although a loan that charges interest isn’t always ideal, it can be a good thing to be forced to make regular monthly payments. A home equity loan, for example, would require you to pay down the balance each month, while using a Hometap investment could encourage you to be a little more careless with your funds.

What I mean is this: many of us don’t have tens or hundreds of thousands of dollars lying around. That’s what you’ll need, so it’s essential to plan ahead how you’re going to “settle” Hometap’s investment. Many of us won’t have the willpower to set aside money over the next 10 years for the purpose of paying back what you borrowed (even though it’s not technically called a loan).

Perhaps you’re planning on selling in ten years and downsizing, using the remaining funds to pay back what you owe. But if you want to stay in your home, you may need to refinance or take out a loan anyway.

While Hometap certainly could be helpful for the right homeowner, you want to think through the very real risks. Run a few scenarios in which your home gains and loses value, and figure out how you would address the issue of settling the investment. In many cases, you may be better off simply getting a traditional loan and budgeting for payments.

Who can use Hometap?

Hometap is available to borrowers who meet the following criteria:

• You must have an eligible property
• You must be located in a state where Hometap operates
• Your FICO score must be at least 500 (though Hometap says typically it works with customers with scores over 600)
• You must have at least 25% equity in your home
• The amount you’re looking for is less than 25% of your home’s value or less than $600,000

Hometap is available in Arizona, California, Florida, Michigan, Minnesota, Nevada, New Jersey, New York, Ohio, Oregon, Pennsylvania, South Carolina, Utah, Virginia, and Washington. More states may be added eventually.

The company will invest in homes in active flood zones, but only if homeowners maintain flood insurance during the entire time Hometap's investment is active and you don’t have a manufactured home. Your flood policy must be in place before the investment can proceed.

You must also be ready to settle the amount you receive within the 10-year investment term. So if you were looking for a longer-term loan, Hometap isn't right for you.

Homeowner requirements when using a home equity investment

While your home is still yours and not Hometap’s, once the company has invested, you’re expected to meet certain property requirements. In general, this means maintaining the property and staying current on mortgage, taxes, and insurance.

And while you don’t need permission to sell your home, you are expected to inform Hometap if at any point during the 10-year term you decide to:

• Refinance your mortgage
• Sell your home
• Rent or lease your property
• Take out another lien on the home

You can repay Hometap when you sell your house, out of your savings, or use loan proceeds if you refinance your mortgage. If you don't sell, and therefore don’t know the market value of your home, Hometap will do an appraisal at the time of settlement to see what your house is worth and determine its share.

It’s also possible to have your home value reassessed if you’ve done any renovations you believe have added value. You’ll need to offer evidence of renovations within 90 days of completing them, and an appraiser may determine your renovations have added value up to $25,000 to your home.

Why you might want to work with Hometap

There are plenty of reasons you might need cash. You may have a lot of equity in your home but feel unable to handle expenses, and selling your house isn’t usually the solution. Taking out a loan isn’t always the best option, either.

You can use a home equity investment from Hometap for anything you like. Some common reasons include:

• Paying off debt
• Funding a costly home renovation
• Paying for higher education
• Funding a large, time-sensitive purchase
• Launching a business
• Injecting new funds into your business

You may not want to take out a loan to manage these expenses since that would come with interest charges and also increase your total debt. That can adversely impact your credit score as well, unlike a Hometap equity investment, which isn’t a loan.

Hometap vs. home equity loans

If you’re wondering how to get a loan, be aware that Hometap is very different from a home equity loan.

When you take out a home equity loan, you borrow from a financial institution and your house serves as collateral. The lender doesn't invest in your home; the home guarantees the loan. You pay interest on a home equity loan, which is how the lender makes money.

With a home equity loan, you're required to make monthly payments and you'll know the terms and total costs up front. It doesn't matter if your home's value goes up or down after you get a home equity loan, your payments to the lender remain the same.

As we’ve said, Hometap isn't a loan, so you don’t make monthly payments and you’re not charged interest. Hometap stands to make money if your property value increases.

If Hometap doesn’t seem right to you and you want to learn more about traditional loan products that can give you access to your home’s equity, look into HELOCs vs. home equity loans.

FAQs about Hometap

How to apply with Hometap

Before you begin the application process, first make sure you are located in a state where the company operates. To apply with Hometap, visit Hometap.com, input your zip code, and click Get an Estimate.

You will need to be prepared to provide:

• Your full street address, including the city, state, and zip code
• The state where the property is located
• The type of property
• What you are currently using the property for (primary residence, vacation home, or rental)

If your property is eligible, you'll also need to provide:

• Your first and last name
• Your email address
• Your phone number
• Information on how you are likely to use a Hometap investment
• Your ideal time frame for receiving the money

You'll receive an immediate investment estimate if Hometap has enough information to provide one. You'll also be connected with a dedicated Hometap Investment Manager who will work with you throughout the entire process.

From start to finish, the process can take as little as three weeks from the application time until you receive your wired funds.

Alternatives to Hometap for accessing your home equity

If Hometap isn't the right approach for you and your personal finance situation, you have other options for getting the cash you need out of your home’s value.

Home equity loan

You could consider a home equity loan, which allows you to borrow against your home in a more traditional way. This is a loan guaranteed by the value of your home, which provides you with a lump sum all at once. You pay back this loan over time, and the lender charges interest.

Home equity line of credit (HELOC)

You could also explore home equity lines of credit (HELOCS). Instead of a flat lump sum, you’re given a maximum draw amount and you can take out as much as needed, up to that total.

You can draw from the line of credit as needed during the draw period, which typically lasts up to 10 years. HELOCs are helpful as a revolving line of credit, especially if you’re conducting home renovations designed to increase property values. Your funding needs may fluctuate throughout the project — you might only borrow a small percentage of your maximum draw amount, then pay it back even before the draw period is over.

You’ll have to pay interest on what you borrow during the draw period, but otherwise, you’re free to draw up to the maximum as often as you wish (provided that you repay it before withdrawing more).

Next you’ll begin the repayment period, during which you’ll need to make regular monthly payments back based on whatever you borrowed, plus interest. To learn more, check out our list of the best mortgage lenders.

Unlock

If a loan or line of credit doesn’t sound ideal, Unlock is another company that offers cash in exchange for a portion of your home’s equity. Like Hometap, Unlock isn’t handing out loans, so this doesn’t show up on your credit report, and you repay or settle the investment in 10 years.

You need a minimum FICO score of 500 to qualify, and you pay transaction expenses and a 4.9% origination fee at closing. The fee is higher than Hometap’s 3.5%, and Unlock’s maximum home equity access is $500,000 (compared to Hometap offering up to $600,000).