Point Home Equity Review: Pros, Cons, And Alternatives

Point is a HELOC alternative.

"What if you could get cash today in exchange for a share of your home's value in the future? 

Most Americans have the majority of their wealth tied up in their home. This is wonderful in the long term – but does little to alleviate the cost of day-to-day living. What if there was an alternative that let you take some of the equity from your home without an additional monthly payment?"

Well, that's what Point is doing, and it has some intriguing uses - including being used as a "bridge loan" to cover the costs for buying a new house, to paying off high interest debt.

Point is offering the Home Equity Investment (HEI). It's an alternative to a HELOC. Keep reading to learn more about how it works and to see if selling equity in your home could be worth considering.

What Is Point?

What Does It Offer?

When Point allows you to extract cash from the equity of your home, you don't have a monthly payment, ever. However, you may choose to repay your investment anytime before the 30 years.

If your home appreciates, you will pay Point back the lump sum you were given as well as a certain percentage of the home’s current value (usually between 25-40%). Point will not share any of the starting value of your home, only the increase. On the flip side, if your home drops in value, Point will share in the loss with you.

When you get a Home Equity Investment from Point, they do not become a co-owner of your property. They're simply becoming a partner in the home's change in value when you decide to end the agreement. They secure their interest in the property with a Deed of Trust just like a lender would.

30-Year Terms

Yes, you will have to pay Point back, but unlike traditional bank products, Point does not require any monthly payments. The Point HEI typically ends when:

As mentioned earlier, when you decide to end the Point HEI, you will pay Point the money you were given for the shares in your property and their prescribed percentage of the change in value of the home. This is how they potentially earn a profit.

Since Point is a fintech company, it uses several algorithms which allow the company to know how much your home is likely to appreciate over the next 30 years.

Risk Adjustments

One of the downsides of using Point is that it will reduce your home's appraised value 15% to 20% right off the bat. It calls this reduction a "risk adjustment" if your home decreases in value.

With that said, Unison, a Point competitor, also has a risk adjustment. Hometap, another competitor, doesn’t have a risk adjustment, but they share in the value of the home from $0, which is essentially doing the same thing. 

Still, we're not fans of this risk adjustment. The odds are already in Point's favor that it will earn a profit on its investment in your home due to the fact that home values tend to rise over time. But Point stacks the deck even further its own favor by adjusting your home's initial value to 75-80% of its appraised value.

Investments In Rental Properties

Most home equity sharing companies will only make investments in homes that are owner-occupied. But Point is unique in that it doesn't require you to be living in a home to access a portion of its equity.

You'll pay a "Rental Premium" if you decide to take out an investment on a rental property though. Point says that this premium is typically 10% of its typical appreciation share.

So, for example, if Point would receive a 30% share of the appreciation of an owner-occupied home, it would receive a 33% share of the growth of the same property if it's occupied by renter.

Are There Any Fees?

There are a few fees associated with Point. You will have to pay for the home visit with the appraiser. This will typically cost between $500 and $820.

Point also collects a 3%-5% transaction fee. Note: The homeowner will not be responsible for paying any of these upfront fees out of pocket. They will all be deducted from the wire prior to sending funds into your bank account.

Finally, when the time comes to settle your investment, Point will charge a $45 Reconveyance Service Fee and $30 Payoff Demand Statement.

How Does Point Compare?

When compared to its competitors, Point has two features that set it apart. First, it gives homeowners up to 30 years to settle their investments. Unison does too, but Hometap investments must be settled within 10 years.

Second, Point will invest in rental properties. This is something that Unison and Hometap are both unlikely to allow. You'll have to give away a slightly higher share of the home's appreciation if it's an investment property, but it could still be a compelling option if you're looking to access equity from an investment property

Despite these benefits, you'll need to decide whether the risk adjustments that Point applies is worth it. It might or might not be, depending on your situation. Just remember that you are immediately giving up 15% to 20% of your home's appraised value. 

Unlock is a newer alternative to Point that allows you to also get up to $500,000, but they have a 10 year term.

Check out the full list of HELOC alternatives here.

Here's a closer look at how Point compares.

How Do I Apply With Point?

To qualify for Point’s program, you should typically have 35% or more equity in your property (however, it can be as low as 20%).You can sell equity in the following properties:

• Your primary residence
• Second home
• Condo
• Townhome
• Non-owner occupied single family home
• 1-4 Unit Multifamily

Note: W2 income is NOT required to apply for Point. So if you are self-employed, unemployed, retired, etc., you can still qualify for an HEI.

If you meet the above requirements, you can simply click on the link here, enter in your information, and answer a few pre-qualifying questions. A pre-qualification decision will be provided within 5 minutes of you entering in your information.

How Would This Work In Real Life?

Looking for some real-life use cases of a Point investment. Let's dive into two scenarios where Point could really make sense.

Using Equity Like A Bridge Loan

Let's say you're looking to buy a home in a hot housing market. You currently have a $500,000 mortgage, and a $1,000,000 home. You have about $50,000 in cash, but that's not enough to make a "good down payment" for your offer on your new home. Remember - it's a hot housing market.

You could take out a HELOC and get more cash out of your house - you have $500,000 in equity. But the problem? Taking out a HELOC will negatively impact your debt-to-income ratio, and could jeopardize getting your new mortgage.

That's where Point comes in. If you sell the equity in your home, you walk away with cash that you can use for the down payment on your next house. But since it's equity, it doesn't show up on your credit report, there are no monthly payments, and you don't impact your debt-to-income ratio. 

When you sell your old house, Point takes their equity back in escrow. This is a great scenario for using Point to sell equity.

Using Equity To Pay Down Debt

Another great use case for Point and selling equity in your home is to pay off high interest debt. For example, say you have high interest credit cards or student loans and you're looking for a way to get rid of them. Beyond saving interest payments, you want to improve your debt to income ratio (maybe to buy a future home) and improve your credit score (to qualify for better rates and terms).

Selling equity in your home is a great use case for this versus alternatives like refinancing the debt, or taking out a personal loan to pay of credit cards. 

With both refinancing and a personal loan, you still have the debt on your credit report, and you're still paying interest on the debt - likely high interest too even in the best cases. 

If you used equity in your home, you could literally be debt free (or at least consumer debt free). Once again, since equity doesn't show up on your credit report or require monthly payments, the savings in interest alone could be substantial. Plus, you'll likely boost your credit score significantly in the process.

Is It Safe And Secure?

Yes, Point isn't a scam. It's been in business since 2014 and its product works as advertised. Its website is also encrypted and, according to its Privacy Policy, Point does not sell its customers' sensitive information with third parties.

Contact

You can get in touch with Point by phone at 888-764-6823. Operating hours are Monday-Thursday, 6 AM - 6 PM (PST) and Friday, 6 AM - 4 PM (PST). You can also reach out by email at [email protected].

Point has an "Excellent" customer service rating on Trustpilot of 4.6/5 from over 450 customer reviews. It's also currently rated A+ with the Better Business Bureau (BBB).

Common Questions

Let's answer a few common questions that people ask about Point:

Does Point provide home remodeling adjustments?

No, unlike some of its competitors, it doesn't appear that Point will adjust the final value of your home based on renovations you've made that have changed its value.

Can I buy out Point before my term ends?

Yes, you can settle your agreement with Point at any time, whether you sell your home or not.

Can Point force me to sell my home?

Yes, if you're unable to use cash or take out a loan to buy out Point at the end of your term, it could force a sale of your home in order to receive its share of your home's current value.

What happens if I die before I settle my agreement with Point?

Nothing will change and no payment will be due. Your contract with Point will transfer to your heir(s) and the originally agreed-upon terms will apply.

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