HomeTap Secures $60M to Offer Home Equity Access
Hometap Secures $60 Million to Expand Home Equity Investment Platform
Hometap, a company providing homeowners with access to their home equity without traditional loans, has successfully raised $60 million in a new funding round.
American Family Ventures spearheaded the investment, increasing Hometap’s total funding to $95 million since its founding in 2017. Participation also came from both new and existing investors.
How Hometap Works: Tapping into Home Equity
Hometap offers a unique approach to home equity access. Homeowners can obtain capital by partnering with an investor who receives a portion of the property’s future value.
Upon the sale of the home or settlement of the investment, Hometap receives a predetermined percentage of the sale price or current appraised value.
“Our goal was to create a business with a positive social impact,” stated CEO Jeffrey Glass. “Many individuals possess significant home equity but lack readily available cash for needs like home improvements or education, and historically their options were limited to borrowing more or selling.”
Significant Growth and Revenue Increase
While specific revenue figures were not disclosed, Glass revealed that Hometap facilitated four times the number of home equity investments in the first ten months of this year compared to the same period in 2020.
The company experienced more than a tripling of revenue growth this year and expanded its team to 140 employees.
Glass anticipates continued substantial growth, potentially doubling or even tripling again in the coming year, building on 14 consecutive quarters of quarter-over-quarter growth.
Differentiating Factors: A Stress-Free Alternative
Hometap distinguishes itself from other equity-sharing models by minimizing homeowner stress. The amount owed is known upfront, unlike appreciation-based models where the final cost is uncertain.
Unlike traditional loans, Hometap does not require monthly payments or charge interest. Some homeowners utilize the funds to consolidate debt and improve their credit scores.
Investments have a 10-year term, allowing homeowners to settle the investment at any point within that timeframe through buyout, home sale, or mortgage refinancing.
Technology and Investment Approach
The company’s software utilizes automation to streamline the homeowner experience. Proprietary financial models and forecasting tools are employed during the investment evaluation process.
Glass emphasizes that Hometap functions as an investor, offering a “smart loan alternative.”
Expansion Plans and Revenue Streams
Currently, Hometap operates in 15 states, including Massachusetts, New York, California, Virginia, Florida, and North Carolina. The new capital will be allocated to hiring, expanding its partner network, nationwide operational growth, and the introduction of new financial products.
Hometap generates revenue through a one-time fee deducted from homeowner proceeds, with the majority of income derived from investors contributing capital to the properties.
“We earn a fee for investing in these homes, including an acquisition fee and an ongoing management fee,” explained Glass.
This model shares similarities with Pipe, a fintech company connecting investors with startups for upfront capital in exchange for a share of future revenue.
Investor Confidence and Future Outlook
Alan Valkin, managing director at General Catalyst, highlighted his firm’s long-term investment in Hometap, recognizing their innovative approach to homeowner equity access.
“We recognized Jeff and his team’s ability to provide a homeowner-focused solution for leveraging home equity and achieving financial goals without the burden of debt,” Valkin stated.
Dan Reed, managing director at American Family Ventures, affirmed his firm’s belief in Hometap’s mission to provide homeowners with greater financial flexibility since their initial investment in 2018.