Massachusetts is just the first step for burgeoning firm
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Homeowners in Massachusetts are the first to be offered a new home equity product that does not involve getting a loan.
HomeTap is aiming at disrupting the market for refinance mortgages and HELOCs with its home investment platform which advances typically between 10% and 20% of the home’s equity in cash to the homeowners.
When the home is sold, the company shares in the proceeds in line with its investment share.
A recent study commissioned by HomeTap found that homeowners in the US who had owned their home for at least 5 years reported more than $120,000 in equity but only 1 in 3 felt it was easily accessible if they want it.
“Millions of homeowners are the exact definition of house rich and cash poor,” said Jeffrey Glass, CEO of Hometap. “Many of us are sitting on hundreds of thousands of dollars of equity in our home while we wait on other financial goals, ranging from paying off debt, to helping our kids go to college, to taking that dream vacation.”
What happens if the home value drops?
Homeowners make no monthly payments and the investment of the company is 10 years, but the owner can sell, refinance, or buy-out the HomeTap investment at any point.
While owners are obliged to keep up mortgage and other payments, and keep the home maintained; the risk of falling home values is shared by the company.
As it receives a set share of the home’s value, if the price drops they receive less.
HomeTap recently secured Series A funding of $14.5 million with investors led by G20 Ventures and joined by previous investor General Catalyst, as well as American Family Ventures, the venture arm of AmFam Insurance, and Pillar.
