Hometap - worth doing?

DH and I are considering tapping into our home’s equity using this: https://www.hometap.com/how-it-works/ to do a room addition, which we’ve had estimated at 100k (assume it comes in more than this, since prices/labor high)

Basically, you get money from them, and they get a percentage of the equity you have in your home and get their money when you sell (I don’t know how this works with if you put the home for rent). WIth the recentl rise in equity, our house has gone up 400k since we first purchased the home last year.

I am not a huge fan, and am arguing for a HELOC, but this seems like a no debt way to take out some equity from the home to deploy without adding a payment to our daily bills. DH is arguing that this is what rich people do, leverage equity to increase their return, etc. adding this room will definitely increase the value of the house, we would be a 5bd 2ba house, and perfect for a family who needs a guest bed and a home office, but I might confirm with a local real estate agent as well.

any thoughts? i am starting to get convinced but not sure…

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Get that HELOC. It’s cheap capital and only use it if you need it. It’s good to have in general as emergency fund.

Turn on the margin in your taxable accounts too. Especially if you big balances with at schwab/fidelity , you can request cheaper than advertised rates so at least get close to interactive brokers rates

Please read the fine prints. You need to settle at or before 10 years. This means that if your equity grows by 10x, debt also grows proportionally. I would stay out of it. This is “bad” debt. :slight_smile:

Addition @ 100K is not a reasonable budget. Also, you need to add a bathroom. Baths are valuable as kids grow up and you have guest.

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this is really helpful! thank you!! I think we will just do the HELOC. and the bath is a good idea, but it feels like a can of worms. you are right about it. we moved from 2.5 bath to a 2 bath and we miss that 0.5 bath…

HELOC is a much better way to go. I took a HELOC and completed a substantial expansion of my house couple of years ago, then did a cash out refi to combine the main mortgage and HELOC at a low fixed interest rate.
It is not worth giving someone else a piece of your home’s ownership and slice in the future appreciation for just $100k.


this is what I was going to tell my husband - but couldn’t express myself well, this is very helpful.

You can ask your husband to think of this scenario:
Home tap states that the transaction needs to be settled in 10 years - that means in 10 years you either have to buy out their equity stake or sell the house.
Let’s say your house is worth $2M after the remodel. It may reasonably double to $4M in 10 years. At that time, Hometap’s equity stake may well be $300-400k. How would you feel about having to repay that lump sum or be forced to sell your home in 2032?

What will your floor area ratio become after the addition? Will it be on same floor or different floor?
Add a bathroom too with a room. And think of where the access to the room will come from.
These little things can make a lot of difference between an addition, and a smart addition.
HELOC sounds best. Probably 10 year draw and 20 years of repayment.;


:+1: We have similar belief. I prefer bedroom/baths 4/3.5 rather than 5/2 anytime.

Most SFHs in Austin have a SOHO (room with door but no closet) so a 3/2 is 3bedrooms + 2baths + 1 SOHO. Newer houses will have a media room too i.e. a new 3/2 SFH has 3 bedrooms, 2 baths, 1 SOHO and 1 media room.

Sound like they would own “free” appreciation as they don’t have to pay for any re-modeling and renovation that would increase the house worth.

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I like to take utilitarian approach to a home if someone is buying to live and raise a family. This is the place where you come after work everyday (or just work from within these days), eat dinner with your family. See your children grow up and go to college one day. And you grow older too as time passes by and probably retire from work in the same home. How much equity do you build in a home is secondary benefit. The home becomes a part of life and memory.