Last updated Apr. 18, 2023 by Benedict Osas
Most property owners are familiar with the terms “home equity loan” and “home equity line of credit” right away as financial products. With these, you can use the value of your property as security for a loan.
But only some are keen to take on more debt. Reading this Point Review can help you to handle your urgent concerns.
To learn more about Point and its home equity services, continue reading.
Key Features Of Point Review
Point is based in Palo Alto and is offered by a California-based startup, Point Digital Finance, Inc, which has been in the financial services industry since 2014. Also, the availability of Point is limited to 19 states (and Washington, DC).
Some of its features include;
- Affordability, even with bad credit
Point accepts applicants with credit scores as low as 500.
- Maximum investment of $500,000
The home’s current market value will determine your actual offer price, and your equity level will determine your offer price.
- Protracted duration of agreements
Point’s 30-year contract term gives residents a great deal of freedom to plan their lives as they see fit. But, unfortunately, you can only hold most home equity loans for a maximum of 10 years.
- The proportional share of rising property values
Point’s return depends on your home’s appreciation rather than the home’s full value, which is different from most shared equity investors.
If you opt to get your money back at the contract’s end, it will cost you between 15% and 40% of how much your home has appreciated during that time. In addition, Point is liable for a portion of the loss in value if your home’s market value drops.
- Only cash withdrawals are allowed.
Existing homeowners have the option of borrowing up to 22.5% of their home’s value to access up to 45% of the value.
The loan proceeds may be used for lawful purposes, like retirement, home improvements, and debt consolidation.
You can only get it in certain states. About nineteen states now have access to Point.
Unison Home Equity
Unison, founded in 2004, provides home equity agreements (HEAs) to homeowners who want to borrow up to 17.5% of their house’s value. Unison will then have a lien on your home’s appreciation in exchange.
Even though Unison does not require a monthly payment or interest, there is usually a 3% fee for the loan’s origination costs and an appraisal fee and settlement cost.
With home equity pooling, Unison provides an alternative to refinancing and HELOCs. And with no monthly payments or interest, homeowners can access up to $500,000 in equity.
Its Pros include;
- No payment for over 30 years.
- Incurs no interest charges.
Cons
- Discontinued in some states
- Spends more money
Home Equity Investment Companies
By entering into a shared equity arrangement with a home equity investment company, you can receive a lump sum payment without taking on any more debt or making any monthly payments. Instead, the payment is a share of your property’s expected appreciation.
The list of these companies includes:
Point
Agreements of up to 30 years in length are feasible at Point. In addition, you can take out a loan for up to 70% of the value of your home, and you can pay off your loan pretty early without incurring any fees.
Unlock
Unlock is unique among equity-sharing organizations because of its adaptability. Unlock is the only provider that will purchase back a portion of your home equity agreement, even though their contracts are only good for a maximum of 10 years.
After entering into the arrangement, you can buy back as much as half of your initial investment.
Hometap
Hometap is a good option for consumers with average or mediocre credit. With this company’s plan, you can borrow up to 75% of the property’s worth throughout a 10-year contract. At most, you can borrow up to $400,000, which is pretty much equal to 30% of your home’s value.
Unison
Unison is the best option for homeowners with high-value houses because it offers contracts of up to $500,000. However, their maximum loan amount is 17.5 percent of your home’s value, and they require a credit score of 620 or higher.
Noah
Created in 2016, Noah (formerly known as Patch Homes) offers a Financial Protection Program. If you are a homeowner having trouble making your mortgage payments or saving up for repairs, this program may help. There are also no limitations placed on how homeowners can spend the money.
Hometap or Point? That depends on how soon you need the service. While you have up to 30 years to repay a Hometap loan after selling your equity, you only get 10 with Point. And most home equity petitions are far within both programs’ maximum amounts of at least $500,000.
Hometap is ideal for owners who won’t be staying put for too long. And homeowners who plan to sell or pay off the investment in less than ten years are also good candidates for a 10-year mortgage. Potential homebuyers could include retirees or parents whose children are moving out for college.
Point provides a more generous time frame, suggesting that its solution could be useful in a larger range of homebuying contexts. And almost all mortgages are for 30 years, so that’s about how long most people plan to keep their homes.
After you’ve paid off your mortgage, you should have significant equity to use toward retirement or a new home.
Home Equity Investment Pros And Cons
Pros
- A guaranteed fixed interest rate and predetermined monthly payments over a predetermined period.
- Lower interest rates compared to many other popular types of debt.
- Easy access to large sums of money that you might not be able to get through other channels.
- Your monthly payment will be predictable payments that are determined at the beginning and will last for many years.
- Potential tax advantages that might reduce your taxable income at the end of the year.
Cons
- Features a lump sum payment means that you might take out more money than you need, spending it carelessly and lowering the value of your home in the process.
- Risks include going into foreclosure and going underwater on your loans, which prevents you from being able to move or sell your house if its value drops.
- You might take on more debt obligations than you’ll eventually be able to handle.
- A more time-consuming and expensive application process that typically takes weeks or months while the bank reviews your application and credit history.
What is an alternative to a HELOC?
HELOCs or home equity line of credit, are an option for homeowners looking for a loan to pay for unexpected costs.
There are several people who would prefer a fixed interest rate and are aware of this option. Although the inability to make the monthly payments, poor credit, or the desire to refinance your primary mortgage are other possible causes.
Each potential substitute for a HELOC comes with its own set of pros and cons, such as different rates and fees or a shorter loan term.
In place of a Home Equity Line of Credit, you may want to consider some alternatives such as;
Cash-out Refinance
You can consider cash-out refinancing as a viable option and an alternative to a home equity loan or credit line(HELOC). You can get the difference between your new mortgage and what you owe in one lump sum by doing a cash-out refinance on your primary mortgage.
Closing costs are associated with both cash-out refinances and home equity products; however, the costs are typically higher.
You might want to consider the full lifetime costs of each to help you choose the best course of action.
Credit Cards
Similar to a HELOC, credit cards also provide a line of credit. This makes loans for any reason simple, but it is also very expensive. Average credit card interest rates are frequently substantially more than 10%; they are significantly higher than those on home equity loans, mortgages, and even personal loans.
It’s better to pay off any charges within a few months, although credit cards might be useful if you require a significant sum of money or a steady flow of cash over time.
If you can’t, you might pay high-interest rates and could easily become caught up in a debt cycle. And your credit score can be negatively impacted by this.
Reverse Mortgage Line of Credit
The best option for senior homeowners who don’t want to make monthly payments is a reverse mortgage, with the proceeds taken as a line of credit.
Over time, the amount of the credit line that is unutilized increases.
If your home’s worth or the economy’s performance declines, say, in a market crash, you won’t lose access to a HECM line of credit.
To qualify, neither a minimum credit score nor a fixed income is required. If you later decide that receiving regular monthly payments is preferable, you can also adjust your reverse mortgage payment schedule.
Does It Make Sense To Get A HELOC?
Taking out a HELOC to pay for renovations that add to your home’s value can be a smart move. A HELOC can provide access to lower-interest financing than other options, such as credit cards or personal loans, in the event of a genuine financial emergency.
But you should not utilize a home equity line of credit for discretionary spending like a trip, a new car, paying off high-interest credit card debt, tuition, or real estate investments. Foreclosure is a real risk if you have a HELOC and you aren’t keeping up with your payments.
Can You Buy Points On A HELOC?
Many HELOCs have no points, but certain lenders may let you pay them to get a cheaper interest rate.
Still, there are scenarios where it makes sense to use points as currency. You can consider paying the points to get the lower interest rate if, for instance, you are getting a huge line of credit that will take years to pay back.
Your points investment should be recovered over time by the savings you reap from your lower interest rate and, consequently, lower monthly payments. Also, when dealing with a small line or one you intend to pay off fast, it may not be worth it to pay points.
How Can I Get Equity Out Of My Home Without Refinancing?
Two of the most common ways homeowners can access their equity without refinancing are home equity loans and home equity lines of credit. You can get a loan against your home’s equity in these two ways.
You can get a large sum of money with a home equity loan and then make monthly payments on the loan.
Alternatively, you could also put your money into a home equity investment. Through these agreements, you can get a lump sum of money in exchange for a portion of your home’s potential future value. The investor does not require any additional monthly payments or debt consolidation loans in exchange for a portion of the home’s value at the end of the term or upon sale.
However, the best option for you will be determined by several factors, including your credit history, financial situation, and current equity in your home.
Can You Be Denied A HELOC?
Lack of sufficient equity in your home can result in a denial of your HELOC. In addition, it is very much unlikely that it would be possible to get a loan of any size unless you have a minimum of 20% equity in your home.
Furthermore, your debt-to-income ratio (DTI) is the sum of all your revolving debts (credit card payments, loan payments, etc.) divided by your annual gross income. You can calculate your DTI percentage is by taking your total monthly debt costs and dividing it by your total monthly take-home pay. The lower this ratio is, the better, and many financial institutions will not approve your HELOC if it is higher than 43%.
Some Frequently Asked Questions On Point Review
What Happens To HELOC If The Market Crashes?
Your home’s equity will decrease if the market declines and your property’s appraised value drops. In such a case, the lending institution has the right to reduce the amount you can borrow via your HELOC to reflect the amount of equity you still have in your home. So, you can expect a HELOC freeze if you are currently experiencing negative equity.
Is It Very Smart To Use A Heloc To Invest?
Increasing your home’s value with the help of a HELOC is a smart financial move. Use caution, though, because credit card debt can quickly add up if you use it to cover expenses that would strain your budget otherwise.
Final Thoughts
Suppose you have a lot of money riding on the success of the real estate market but are concerned about the impact a decline could have on your wealth. In that case, you may want to consider using Point to tap into some of your equity and spread the risk of declining property values.
If you’re trying to decide if a shared equity loan is right for you, you’ll need to consider whether or not you’re willing to give Point a stake in your home’s future appreciation.
