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Home Equity Investment Alternatives

Companies like Unlock, Point, Hometap, or Unison: what do they do and how are they different?

Unison, Point, Hometap, and Unlock are all companies that offer "Home Equity Investment" (HEI) or shared appreciation products. These allow homeowners to access a portion of their home equity without taking out a traditional loan, essentially letting you "unlock" some of your home's value; each company has slightly different terms and requirements, but they all share one thing in common: you get cash today, in return for giving up some future gains on your home’s value. It’s like they co-invest in buying part of your home. They are a great deal for investors as they get a motivated landlord (you!) and the benefits of various government and tax subsidies behind homeownership (like our mortgage market).

Alternatives to Hometap, Unison, Point and Unlock

A typical house that you could tap the equity of with a Home Equity Investment product
1

Hometap - 10 year repayment term.

A good option for homeowners with fair credit who want to leverage their home equity. Hometap offers up to $600,000 in funding, and you can buy out the company's share at any time without penalties.

2

Unison - 30 year term.

Shares in gains and losses: get all the benefits if you make home improvements.

3

Unlock - 10 year term.

Offers up to $500,000 in funding, and allows for partial buyouts so you can buy back your equity over time. Unlock charges an "Unlock Share" fee, which is the percentage of your home's future value you'll owe when you exit the agreement.

4

Point - 30 year term.

A good option for homeowners with bad credit.

Partial buyouts availableOffer

up to $500,000

Unlock
10-year term
Buyout anytime with no penaltiesOffer

up to $600,000

Hometap
10-year term
No need for perfect creditOffer

up to $500,000

Point
30-year term
Share in gains and lossesOffer

$30,000 to 15% of your home value

Unison
30-year term

What is Equity Sharing? Or Home Equity Agreements, Home Equity Investment Products, Shared Appreciation Agreements…and who can benefit?

These agreements can be ideal for individuals in the following situations:

  • - Can't qualify for a HELOC or home equity loan: flexible credit and DTI requirements make them a great option credit score and lowering high payments on other debts.
  • - Need to renovate without taking on debt: Access funds for home improvements without monthly payments.
  • - High net worth tied to home: Diversify your assets by freeing up home equity for other investments. In an ideal world, we’d all have more diversified portfolios of risk than most of our wealth tied up in a single house.
  • - Can't afford more monthly payments: Get cash without immediate repayment or interest charges.
  • - Don't have a 20% down payment: Use equity to avoid private mortgage insurance (PMI) when buying a home.

PROS

Allows you to tap into your home equity without getting into debt.

No monthly payments or interest charges - can help rightsize your monthly budget

If your property drops in value, usually the amount you have to repay drops too.

CONS

You typically need a minimum of 25% equity in your home.

You may have to refinance or sell your house in order to repay the investment.

While you might not have monthly payments today, the expected effective interest rate you're giving up from a future share in your house can be high by reducing the profit when you sell your house.

When comparing home equity investment partners, consider the following factors:

Financing timeline.

Processing times vary between companies - choose based on your timeline needs.

Fees.

Some companies charge servicing fees at the outset of the agreement (e.g., 3% of the financing amount). Home appraisal, escrow, and title fee may also included. Factor all these costs in before making your decision.

Term & triggers for repayment.

Know when repayment is required (usually at sale or hit the maximum time limit: 10-30 year term) and choose a timeline that fits your needs.

Stake in gains and losses.

The stake an investor requires in your future appreciation or depreciation will vary. This is very important, as it determines how much you'll have to pay in the end.

Investment amounts.

The amount a company will invest can vary. Compare maximum loan-to-value limits (e.g., 80% max LTV) as well as minimum and maximum dollar limits.

Eligibility.

Companies vary in whether they serve homeowners, homebuyers, or both. Requirements for credit and location also differ.

Reputation.

Check into the company's reputation and how past customers feel about their experiences with the company. We monitor customer feedback and only recommend companies with proven track records.

By comparing these factors, you will be able to find the offer that’s the best value for your needs.

* ”Amid rising prices, American families fall deeper in debt” by Jessica Dickler, CNBC.** Bhutta, Neil, Andreas Fuster, and Aurel Hizmo (2020). Paying Too Much? Price Dispersion in the US Mortgage Market," Finance and Economics Discussion Series 2020-062. Washington: Board of Governors of the Federal Reserve System, source.*** https://www.forbes.com/advisor/credit-cards/average-credit-card-interest-rate/† https://www.consumerfinance.gov/about-us/blog/americans-pay-120-billion-in-credit-card-interest-and-fees-each-year/#note2†† https://www.debt.org/faqs/americans-in-debt/