Hometap, a Boston-based company that describes itself as a "loan alternative for tapping into home equity without taking on debt," is looking to make it easier for homeowners to turn the value of their homes into liquid assets. And the company just received $100 million in financing to help it expand and work with more homeowners.
CEO Jeffrey Glass said a gap between house prices and family income means that many homeowners "look terrific on paper," but can typically only access a home's equity by taking on debt with monthly payments. He compared Hometap's offering to a business opting to bring on an equity partner rather than take out a loan.
"We offer a homeowner capital today and in exchange for that we don't charge any interest or any monthly payments or monthly fees," Glass told FOX Business. "What we do is, we take a percentage in the future value of the home, just like an investor in a business might."
Hometap gets its cut of the home's value when the owner sells or refinances, or when they just decide to buy out the company's stake. Glass said its current offering for homeowners is a 10-year product.
The company doesn't require homeowners to use the money to increase the value of their homes. About half the people who work with Hometap use at least a portion of the money to pay down existing debt like a credit card or second mortgage, according to Glass. Others use it to fund home improvements or renovations, and some have even used the money for costs like their children's college tuition or health care.
"Our view is, it's your house, it's your equity, and you should be able to do what you want with that capital," he said.
The strategy is not without its risks. If home prices tanked, Hometap could see the value of its investments drop with the market. But Glass said the analytically-driven company tries to "make smart investments alongside prudent homeowners" with homes that will appreciate in value under average conditions.
"We're trying to invest along trustworthy, thoughtful homeowners and be aligned with them, because they also want their homes to go up in value," Glass said.
Homeowners interested in working with Hometap start by filling out a quick form on the company's website. Then, the company replies with whether they're interested and how much they might be willing to invest. The whole process can take as little as two weeks, according to Glass.
And now that Hometap has secured $100 million in new financing from ICONIQ Capital and its existing investors — General Catalyst, G20, Pillar and American Family Ventures — Glass said it's working on adding to its staff, streamlining the process for homeowners and expanding the territory it covers.
Nugi Jakobishvili, chief investment officer of ICONIQ, said in a press release that Hometap is "providing a valuable solution to the challenges faced by many homeowners."
"As investors, it's rare to find opportunities with the combination of an attractive asset profile, a gifted management team and the potential to provide meaningful economic benefits to households across the country," Jakobishvili said. "Hometap's deep bench of high quality, high integrity professionals has created an exceptional platform that helps align homeowners and investors. They are incredibly well-positioned to lead the growth we are witnessing in the market."
Hometap currently works in six states — New York, Massachusetts, California, North Carolina, Florida and Virginia. Glass said it was too early to say which states they'd be expanding into next, but the company has said it aims to reach about 75 percent of U.S. homeowners.