Hometap offers a way to tap home equity for cash without taking out a loan. See the pros and cons.
Hometap, a Boston-based brand, is a leader in the growing home equity agreement industry -- an innovative way for people to tap their home equity for cash without taking out a loan.
Instead of monthly payments, customers promise to give Hometap a portion of their home's equity at the end of the term. However, it can be a risky deal for many because it requires a balloon payment -- a lump-sum repayment -- at the end of the term. The amount is not determined at the start of the agreement, so borrowers won't know how much they owe until the payment is due. Additionally, customers must pay a risk assessment fee, which could end up being more than they'd pay in interest.
CNBC Select likes that, with Hometap, homeowners can leverage their home equity to access cash. This can help them pay off high-interest debt or fund a renovation. We also like that you can have less-than-perfect credit with this product -- something that's much harder to do with a home equity loan or line of credit.
However, Hometap has a spotty customer service record, and its product can be very risky for some homeowners.
