Point Home Equity Review [2024]: Access Equity Without Taking on New Debt

Point at a glance

What is Point?

Point is a fintech company and home equity platform that provides HEI funds for homeowners to access the value of their home’s equity without refinancing, getting a home equity loan, or taking out a home equity line of credit (HELOC). Since it was founded in 2015, the Palo Alto, California-based company has provided over $175 million in equity funding to more than 10,000 homeowners.

When you get a loan or HELOC, you increase your debt and add another payment to your monthly bills. Plus, a large chunk of your payments go toward the interest on that debt rather than the principal balance.

However, with Point’s HEI, there are no monthly payments, no interest, and no penalties for paying it off early. You agree to give the company a percentage of your home’s future appreciation in exchange for a lump-sum cash payment based on your home’s value. You can “buy back” the Point HEI early when you sell your home or at the end of the 30-year term.

Your repayment on the HEI includes the original amount that Point gave you plus a preset percentage of your home’s appreciation value. You’ll also have to pay fees for processing, appraisal, and escrow.

Qualifying for a Point HEI is easier than a home equity loan or HELOC because you only need to have a credit score of 500 or above. There are also no income requirements to be eligible.

While Point HEI sounds like an easy way to access your home equity for paying off debt, financing a remodel, or paying for other expenses, it has some drawbacks. Some clients have complained about long waiting periods for funding, low appraisals, and declined funding after pre-approval.

How does Point work?

The process of getting a Point HEI starts with getting prequalified. You can get an offer on your home within 60 seconds when you apply online. To qualify for the program, you must meet these requirements.

• You have a credit score above 500.
• Your home is of an eligible type and located in an area Point serves.
• Your property value is more than $155,000.
• You don’t have any recent foreclosures or bankruptcies.
• Your home has enough available equity for you to qualify for at least $25,000 from Point.

During the prequalification process, you may have to provide your property’s mortgage balance. Point uses this to determine how much home equity you have, which will help when evaluating the HEI amount you’re eligible for. Home equity is the difference between the balance of your mortgage and the value of your property. Point requires a minimum of 20% to 40% equity to qualify for the HEI.

Once you submit your home address in the Point platform, the system automatically generates your home’s estimated value, which is calculated using public information. A third-party service will need to verify this value during the application process.

This prequalification process won’t affect your credit, and if Point approves you, you’ll receive an initial offer. You have no obligation to accept the offer, but if you do, you must complete a more thorough application that requires you to submit documents, such as your mortgage statements and identification. If you’re using the HEI funds to pay off existing high-interest debt, you may need to submit payoff statements for those debts.

You’ll also need to get an official appraisal, which could cost you $600 or more, to verify your home’s value. This is the longest part of the process. While Point claims it can close on your HEI in as little as three weeks, it could take up to eight weeks before you get the money.

Point also charges a processing fee of up to 3.9% (minimum of $1,000), which it deducts from the lump sum it gives you. For example, if you get a $50,000 HEI, this fee could be $1,950.

How Point makes money

Point makes money primarily by sharing in your home’s future appreciation. Their payoff comes when you sell the house. If your home has increased in value, Point gets a predetermined percentage of the sale plus the amount it initially gave you.

For example, let’s look at a home valued at $500,000. Point determines a risk adjustment for your home value of 27%, putting the Appreciation Starting Value of your HEI at $365,000. The company sends you a lump sum of $50,000 minus the 3.9% processing fee.

On average, homes typically appreciate about 3.5% per year. At this rate, with no downturns in the market, your home would be valued at around $1.4 million in 30 years. If you were to sell it, then your share of the sale at that price would be $1.125 million. Point’s share would be $278,000, which includes the initial $50,000 and $228,000 in appreciation.

However, if your house depreciates, Point also shares in the depreciation and may lose some of the initial funds it gave you. So, given the same HEI numbers, if you decide to sell your home after five years at a depreciated value of $362,100, you get to keep $312,700, and Point receives $49,500.

Point’s HEI is capped at a certain amount to protect your share of the home’s equity. You won’t have to pay any amount over this Homeowner Protection Cap, even if the appreciated amount you share with Point is over the capped amount.

Processing fees

Point also makes money through the processing fees it charges when initiating the HEI. That fee is up to 3.9% of the amount of the HEI. With a $50,000 HEI, the processing fee would be $1,950. There is a $1,000 minimum, so if your HEI is $25,000, your fee will be $1,000 (not 3.9% of the amount).

Why you might choose Point for home equity access

There are several reasons why Point’s HEI is an attractive offer, especially if you need extra cash to pay off high-interest credit card debt, pay for medical procedures, remodel your home, or cover other expenses. Here are a few reasons why you might choose Point’s HEI.

It’s not a debt

Unlike a traditional loan or HELOC, a Point HEI doesn’t add to your debt. Therefore, it won’t show up on your credit report or impact your debt-to-income ratio. Plus, you don’t have to make monthly payments or pay interest on the cash you receive.

You don’t qualify financially for credit products

To qualify for a home equity loan, HELOC, or mortgage refinance, you typically need to have good credit. Lenders will also consider your income and existing debt before they approve you for a loan. Point’s HEI is a more accessible option for tapping into your home’s equity. You only need a credit score of 500 to qualify, and the company doesn’t use your income as a factor.

You want to borrow the equity on an investment property

Point’s HEI isn’t limited to your primary residence like many traditional home equity products. You can also access the equity you have in rental and other investment properties. The extra funds you might get could help you upgrade the rental property or expand your investment portfolio without taking on more debt. However, HEIs for investment properties may have different underwriting criteria.

You plan to stay in your home for a while

I think a Point HEI will most benefit those who plan on staying in their homes for a while. The 30-year term provides plenty of time for your property to navigate the fluctuations of the housing market so you can buy back the HEI when home values are high.

If you’re only staying in your home for about five years, there isn’t much time for your home value to appreciate. And, with current home prices the highest they’ve ever been, there’s a higher risk that your home may depreciate.

What are the drawbacks of using Point?

Before moving forward with a Point HEI, you should be aware of the drawbacks, which could change your mind on whether it’s right for you.

You have to share your home’s appreciation

When you enter an HEI agreement with Point, you agree to share a percentage of your home’s future appreciation. That means if your property increases in value, you’ll owe Point a portion of that gain when you sell or refinance your home or if you buy back the Point HEI. With this model, your home has to appreciate significantly to make money.

You need to have enough equity

Unless you have at least 20% to 40% equity in your home, you probably won’t qualify for a Point HEI. The value of your home also has to be over $155,000 to be eligible. If you haven’t built up equity, you may want to consider another way to get funds, such as traditional loans or refinancing.

Point’s risk-adjusted value for your home is significantly lower

The current value of your home may be $500,000, according to Zillow, but not to Point. To protect its investment in your home, Point uses a risk-adjusted value as the starting point for its appreciation. Based on the previous property example, that value can be about 27% less than the current value, so your $500,000 home may only be worth $365,000 in Point’s eyes.

You could lose your home if you can’t repay the HEI

Like any financial obligation tied to your home, you run the risk of losing your property to Point if you don’t meet the terms of the agreement. While there are no monthly payments, Point still places a lien on the property to ensure it gets its share of the appreciation if you sell or refinance.

The housing market is uncertain

While home prices are currently high, there isn’t a guarantee they’ll keep climbing. The volatility in the housing market is an important factor to weigh when considering a Point HEI. While Point will also share your home’s depreciation, the commitment you made to repay Point may still leave you with considerably less from the sale of your house.

Important requirements for homeowners

Point’s HEI isn’t available everywhere. It’s currently only available if you’re the owner of a property in these locations (select regions).

Other important requirements include:

• A home worth more than $155,000
• At least 20% to 40% equity in your home
• A credit score of 500 or higher

Once you get the funds from Point, you can use them for whatever you want. You don’t need Point’s approval to fix or remodel your home, but Point won’t exclude the value your home gains from any improvements when it comes to repayment.

While Point has no restrictions on renting out the home you’re living in, if you decide to do so, it will charge a Rental Premium fee. This fee is about 10% of Point’s share of the appreciation and is due when you pay off your HEI.

Additionally, Point doesn’t restrict you from refinancing your home, but your lender may require you to repay Point before lending to you. You’ll also need to repay Point before getting a HELOC or home equity loan.

What are customers saying?

Overall, Point has a decent reputation with its customers. The company has an A+ rating with the Better Business Bureau, which reports only three closed complaints against Point within the last year. Based on the BBB’s 137 customer reviews, Point has an average rating of 4.21 out of 5. Its rating on Trustpilot is slightly better at 4.4 out of 5 based on almost 1,800 reviews.

A quick rundown of the complaints shows that these are the biggest gripes customers have:

• Longer processing times than reported
• Poor customer service
• Final offers less than the original amount quoted
• Low-ball valuations
• Unfavorable terms

Alternatives to using Point

If you’re concerned about the terms required for a Point HEI, there are other alternatives for taking advantage of the equity in your home.

Other equity-sharing companies

Unison, Hometap, and Unlock are three other companies that enable you to tap into your home’s equity without taking on more debt. These companies all work similarly to Point in that they give you a lump sum in cash in exchange for a share of your home’s appreciation.

However, their terms may be slightly different. For example, Point and Unison offer terms of up to 30 years, and Hometap and Unlock require you to repay the amount in 10 years. A shorter term may be more beneficial if you sell your house within 10 years.

It's also important to compare the estimated home value a company offers you at the onset. While Point’s Appreciation Starting Value may be 27% lower than your home’s current market value, Unison reduces the appraised value by just 5% for its starting value amount.

Check out our Hometap vs. Point review to see how these two programs differ.

Home equity loan

A home equity loan is a fixed loan that lets you borrow based on your home’s equity. It’s often referred to as a second mortgage because it uses your home as collateral. So, if you default on the loan, the lender can foreclose on the property.

You repay the loan balance in set monthly payments, which cover the principal and interest on the money you borrowed. Like most traditional loans, you need good credit and a low debt-to-income ratio to get approved for a home equity loan. This option may be better if you prefer consistent monthly payments rather than giving up part of your home’s appreciation.

HELOC

A HELOC is a flexible credit line that enables you to borrow against the equity in your home. When comparing a HELOC vs. home equity loan, a HELOC is more like a credit card with a revolving balance, but it still has the risk that comes with using your house as collateral.

Like a traditional loan, you still have to apply for a HELOC through a bank, credit union, or other lender, and you must have decent credit for approval. The HELOC approval process also considers your income, existing debt, and home equity amount, which should be at least 15% to 20%.

Once approved, the lender gives you a credit limit that you can draw from for a specific “draw period,” usually five to 10 years. You usually make interest-only payments during that time. After the draw period ends, you start fully repaying the borrowed money and interest. HELOCs typically have a variable interest rate, and interest only applies to money that you use.

FAQs

Bottom line

Point offers a unique option for accessing your home’s equity without the constraints of traditional loans or monthly payments. By providing a lump-sum payment in exchange for a future share of your property’s appreciation, Point eliminates the need for you to take on added debt and pay interest.

This may be especially appealing if you don’t qualify for a HELOC or home equity loan or if you want to avoid the burden of another loan payment. With minimal credit requirements and no income qualifications, Point’s HEI can be an accessible tool for covering a large expense.

However, you should carefully weigh Point’s advantages and disadvantages. The risk-adjusted starting value and various fees can make Point less favorable, particularly if your property value doesn’t increase significantly or if it decreases.

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Access your home’s equity without a loan, interest, or monthly payments

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