When homeowners find themselves in a situation where they need to come up with extra funds, they often turn to liquid capital in the form of a home equity line of credit (HELOC). While this is an easy solution that guarantees quick access to cash, it comes with its drawbacks. Once a HELOC agreement is signed, it leaves the homeowner responsible for paying it back in the form of monthly payments – putting them in an unfavorable cashflow situation. Even worse, since the homeowner’s mortgage secures the loan, if the borrower fails to make their payments on time, the bank reserves the right to assume ownership of the home and the original mortgage, including the accumulated equity.
Taking out a HELOC has been one of the only feasible and affordable options until recently when the market was introduced to a home equity investment (HEI), also known as home equity sharing agreements. It serves the same purpose as the HELOC but employs a different method. An HEI allows the homeowner to sell a portion of their home’s predicted future value in exchange for a loan. While the loan needs to be paid back, the payment agreement is much more lenient, which we will go into further detail below.
Point Home Equity is one of the newest competing financial institutions to enter the HEI market and has been growing in popularity with mixed reviews. If you’ve been considering Point for a potential HEI, continue reading below for a detailed, honest review.
- What Does Point Home Equity Do?
- Who is Point Home Equity For?
- Does Point Home Equity Charge Fees?
- Alternatives to Point Home Equity
- Pros and Cons of Point Home Equity
- Where is Point Home Equity Available?
- What Credit Score is Required?
- What Property Restrictions Are There?
- Is Point Home Equity Legit?
- Bottom Line
What Does Point Home Equity Do?
Point is a financial lender based out of California, known for its HEI program. The lending program allows qualifying homeowners to tap into their home equity without having to make monthly payments. Loans are issued to homeowners who need quick access to cash for various reasons, including investing in home renovations or paying off high-interest debt. While monthly payments are not required, the program comes with a caveat.
First, the homeowner and Point will need to agree on a fair value of the home, which is determined after a Point-appointed appraisal is complete. If the loan is issued, the homeowner must agree to do one of two things to repay the loan:
- Sell their home on or before the contract end date (maximum 30 years) and pay Point their share of the property value.
- Buy back the equity within 30 years of the contract start date.
Key Point: Homeowners who choose not to sell their home or don’t have the funds to buy back the equity in 30 years can refinance their mortgage to access cash.
For example: If Point approves a homeowner for a cash investment totaling 10% of their home’s current value in exchange for 20% of the home’s total increase in value at the end of the agreement, the homeowner is contractually obligated to pay the total to Point when they sell the home or close their HEI.
Who is Point Home Equity For?
Point is for any homeowner who needs quick access to cash but doesn’t want to sign a monthly repayment plan agreement in exchange for a loan. While all homeowners are welcome to apply, there are a few criteria they must pass to qualify.
- The home or condo must be in good condition and located in a neighborhood where the value of homes is known to appreciate.
- They must meet the credit score criteria.
- Their home or condo must have equity built up, at least 20% – 30%.
These qualifying factors are no different than a homeowner would see when applying for a HELOC with a major bank.
Does Point Home Equity Charge Fees?
Point does not charge monthly payments, fees, or interest for the money provided to their client. However, they charge a processing fee ranging from 3% to 5% for a home appraisal, which can fall between $500 – $820. They also charge a one-time escrow fee (closing cost) of $500.
Alternatives to Point Home Equity
Pros and Cons of Point Home Equity
- No monthly payments
- Less-than-average credit score requirements
- Depreciations risk shared between homeowner and Point
- No interest charges
- Homeowner risks losing a substantial amount of money if their home significantly increases in value
- Applicants are required to have at least of 20%-30% of equity built up
- Applicants pay an appraisal fee and escrow fee (closing cost)
- Point is not currently available in all states
Where is Point Home Equity Available?
Point is currently available to homeowners in the following 21 states:
- New Jersey
- New York
- North Carolina
- Washington DC
What Credit Score is Required?
Point boasts its flexible approval requirements, including no income requirements, no monthly payments, and no need for perfect credit. The minimal credit score threshold is 500, making their HEI program accessible to a wide range of socioeconomic backgrounds.
What Property Restrictions Are There?
According to Point, the only property restrictions are on rental properties. Since rental properties are vulnerable to damage and, in some cases, property depreciation, prices will differ from that of a primary residence.
Suppose a homeowner rents their home after signing their Point HEI agreement; they will be subject to a minimal Rental Premium. This is an additional 10% added to the total value Point is entitled to – due when the agreement ends, or the equity is purchased back.
Is Point Home Equity Legit?
Point Home Equity is definitely a legit company. They have been in business since 2014 and have plenty of good reviews online.
Point Home Equity is a decent alternative to the traditional HELOC for homeowners who own property that is expected to appreciate. It allows them to dip into their equity without worrying about the nuisance of monthly payments. The issue lies in situations where homes are expected to increase in value significantly. In which case, homeowners will end up paying a substantial amount to Point when they end their contract.
The bottom line is you should consider whether you’re okay with Point scooping up a percent of your property’s increase in value and if you can afford to part ways with that much money all at once. While Point offers a convenient alternative to making monthly payments, they recoup those fees plus more at the end of the term, leaving us to conclude that there are far better options on the market for homeowners.