Introducing Hometap: no loans, no monthly payments, no kidding.
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Do you own your own home? If so, you could be sitting on a goldmine.
With real estate prices continuing their skyward ascent in 2021, home equity hit an all-time high. In fact, it's now estimated that 42 percent of American homeowners are officially "equity rich," which means their property is worth twice what they owe on their mortgage.
Want to lock in these equity gains before it's too late? There are several different ways to do that. But one option that has a lot of big-time investors especially excited is a company called Hometap.
How To Leverage Home Equity
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In the past, if you wanted to tap into your home equity, you basically had three options: sell your home, take out a home equity loan, or get a home equity line of credit. If you weren't willing to move or take on new debt, you were simply out of luck.
Today, Hometap is giving homeowners another option. They give you a lump sum of money based on the estimated value and equity of your home. However, instead of paying Hometap back with monthly payments at a fixed interest rate, the cash you receive is in exchange for a share in the future value of your home. They're an investor, not a lender.
How Does Hometap Work?
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When Hometap invests in your home, you have 10 years to settle the investment, at which time they receive their agreed-upon share. So, let's consider an example.
Suppose your home is appraised at $500,000, and you owe $200,000 on your mortgage. That means you're sitting on $300,000 in equity. Hometap might offer to invest $50,000 in your property for 10 percent ownership. If you accept their offer, you will pay Hometap a three percent fee to arrange funding, which will simply be deducted from the investment amount. That means you will get $48,500 up front with zero interest or monthly payments.
To settle your investment, you can buy it out with savings or a refinance, or sell your home.. If you sell your home five years later for $600,000, Hometap gets $60,000 and you still come out $40,000 ahead.
But what if the value of your home stays the same or goes down? Then you're screwed, right? Wrong! This is where you really see the difference between Hometap and traditional lenders. Because Hometap is an investor, they share in the losses if your home value depreciates. If the home that had been appraised at $500,000 is only worth $475,000 10 years later, you will only pay Hometap $47,500.
Find Out If Hometap Is Right For You
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Obviously, Hometap is not the best option for every homeowner. For example, if you have no plans to sell your home within 10 years, and have no idea how you'd pay back Hometap's investment, you might be better off going with a home equity loan or home equity line of credit. However, when the conditions are right, Hometap gives you the ability to use your equity without taking on debt or anxiety.
If that sounds pretty good to you, click here to learn more.
