Point invests in your home equity, providing you with a lump sum of cash without a loan. There’s no income requirement and you can qualify with a credit score in the 500s.
With Point, you access as little as $25,000 up to $500,000 of your home’s equity and it’s easy to prequalify online. You can use the funds however you want. For example, you may want to pay off high-interest debt or purchase another house. Point could be especially useful if you have a rental property, since unlike most competitors the company does not require the home to be owner-occupied.
Unlike refinancing or getting a home equity line of credit (HELOC), Point’s home equity investment (HEI) is not a loan and there are no monthly payments. Instead, you give the company a portion of your home equity in exchange for a lump sum of money.
Once the 30-year investment term ends, you pay back the lump sum as well as a percentage of the appreciation. You may also pay the loan back early. Plus, Point is a reputable company, with big-name investors like Prudential and JP Morgan Chase.
While other companies offer traditional mortgages and home equity loans, Point differentiates itself with its home equity investment program. This product, which isn’t a loan, has benefits – and some drawbacks – that you won’t find elsewhere.
Home Equity Investment (HEI)
People typically take out a home equity loan or HELOC when they need to access the cash they’ve invested in their homes. However, there’s another option that goes by several names: home equity investments, shared equity loans, or shared appreciation mortgages. With Point’s HEI, you can get $25,000 to $500,000. This is fairly standard, though some of the competition does offer up to $600,000.
Just like a traditional home equity loan, you get a lump sum payment. However, you don’t have a monthly bill and you don’t pay interest on the funds. Instead, you enter into an agreement to give 25% to 40% of the appreciation value to Point. If your home hasn’t appreciated at the end of the term or when you end the contract, Point takes a loss, though you’ll still owe the original lump sum.
You can exit the contract and buy back the equity any time throughout the 30-year term with no prepayment penalty. Although people typically do this by selling the home, refinancing, or getting a home loan, you can pay it back however it suits you. If you cannot buy back the equity at the end of the term, Point could force you to sell the home in order to get its share of your home’s value.
The biggest benefit of these agreements is that they aren’t loans. Unlike a HELOC or home equity loan, the payout you receive is not considered debt. If you choose to use the funds to pay off other debt, Point’s HEI can improve your debt-to-income (DTI) ratio rather than putting you deeper into debt like a regular loan. This can also improve your credit score.
Unlike some of the competition, Point also invests in rental properties. While some investors require that you live in the home to qualify, Point does not. However, Point does charge a Rental Premium equivalent to 10% of Point’s share of the appreciation, which is due at payoff. For example, if your home is owner-occupied, you might owe Point 20% of the appreciation. If you rent out the same home, Point would get 22% of the appreciation.
When to Get a Home Equity Investment
Let’s look at how Point’s HEI could work in a couple of real-life scenarios. For example, you might want to renovate your home but aren’t interested in adding to your debt. With an HEI, you can get the cash you need to make the upgrades. You can also use any additional cash to pay off other debt, increasing your credit score. Ultimately, your home’s value will increase thanks to the renovations, as will your equity.
Point can also help if you’re looking to buy another property but don’t want to take out a loan or HELOC for the down payment. A loan would negatively impact your DTI ratio, which could make getting a mortgage for the new house more difficult.
Finally, the HEI can help you pay off high-interest debt and improve your finances. For example, if you own a good portion of your home’s equity but have lots of credit card debt, your credit score is probably fairly low. Getting a personal loan or refinancing your debt would only add to your existing debt. The HEI would give you cash to pay off the debt now, putting you in better standing to reach other financial goals.
By getting an HEI, you can pay off the high-interest debt and boost your credit score. Since it’s technically an investment, you’d be consumer debt-free. You’ll also save a substantial amount in interest, which you can put toward buying back the equity from Point.
Rates and Terms
Many home equity investors only offer a 10-year term, but Point has a 30-year term. This longer timeline gives you the flexibility to improve your financial situation so that you’re prepared to pay off the investor at the end of the term. Plus, you can end the term early with no prepayment fees.
In exchange for its service, Point charges 25% to 40% of your home’s appreciation. When you fill out the application form, it uses fintech algorithms to estimate how much your home will appreciate before approving you, so it’s unlikely that you’d get approved if your home is likely to depreciate. Point reviews your debt-to-income ratio, credit score, equity, and local market’s expectations to determine your specific terms.
It’s important to note that Point has a risk-adjustment policy. This allows it to reduce your home appraisal value by 15% to 20% at the beginning of your agreement. The policy essentially ensures that your home will appreciate over the term. Once you end the agreement, the appreciation will be even higher and you’ll owe even more than if the home was assessed at its regular value.
The risk adjustment policy is a fairly big downside to Point. Its competitors, like Hometap, do not have the same policy and do not lower your appraisal value. With this in mind, you may be able to save money elsewhere, so it’s best to get multiple offers before choosing an investor.
You’ll need to pay for an appraisal to enter into an agreement with Point, which typically costs about $500 to $800. Point also charges several fees. This includes:
- Transaction fee of 3% to 5%
- Rental premium of 10% of Point’s share of the appreciation
- Payoff demand statement fee of $30
- Reconveyance service fee of $45
- Changes to the title cost $250
Application Process and Qualifications
You can pre-qualify and apply for a home equity investment entirely online. You’ll need to provide information, such as:
- Phone number and email
- Social Security number
- Proof of income, like W-2s or pay stubs
- Proof of current home equity and remaining loan amount
To qualify, your home’s property value must exceed $155,000. You must maintain at least 20% of your home’s equity after Point’s investment, though you may need even more if you own a condo, have poor credit, or have a second mortgage. Point will also review your credit profile, though it may accept you even if your score is in the 500s. Most investors require at least 600, so Point could be a good option if you have poor credit.
It’s also worth noting that Point does not offer HEIs for:
- Commercial properties
- Property owned by an LLC, tenancy-in-common, or co-op
- Property on 5 or more acres of land
Like most online lenders and investors, you can qualify with Point in about two minutes. After you submit a full application, it can take as long as 60 to 90 days to receive funds. However, Point does note that if you have a clean title, upload documents quickly, and answer Point’s requests prompt, you can expedite the process.
In comparison, HELOCs can take 14 to 42 days, while refinances and home equity loans can take up to 45 days. Overall, Point takes a bit longer than the industry standard. If you’re in need of fast funding, Point might not be the right choice for you.
You can contact Point’s customer service team Monday through Thursday, 6 a.m. to 6 p.m. and Friday from 6 a.m. to 4 p.m. PST. They’re available via email, live chat, phone call, fax, and mail.
Not all lenders even offer a live chat option, so Point’s customer service channels are extensive in comparion. However, its hours are somewhat lacking compared to other lenders, many of which are available on weekends.
Point’s HEI is fairly unique, with only a few other trustworthy lenders offering a similar product. However, Point sets itself apart by offering HEIs for rental properties. Plus, it gives you a 30-year term with no prepayment penalties, while other lenders only provide you with 10-year terms.
Still, Point does have some downsides – the biggest of which is its risk adjustment. This policy reduces your home’s value by 15% to 20% at the start of your agreement. Since home values typically rise over time, Point would likely earn a profit without the risk adjustment. With the adjustment, it stands to earn even more.
With this in mind, Point could be a great option if you have less-than-perfect credit and your bank has denied your HELOC or refinance applications. You might also consider it if you need a bridge loan to help you cover a down payment on a new home, since it won’t impact your debt-to-income ratio. Plus, it could be helpful if you need to pay off high-interest debt.
Is Point a legit company?
Yes, Point is a safe, secure company that has been in business for over eight years. Plus, its website’s encrypted and it does not sell sensitive customer information to third parties.
Is home equity investment a good idea?
Home equity investment isn’t for everyone, but it could be a good idea if your bank denied you for a HELOC. It can also improve your debt-to-income ratio and credit score. You can use the funds to pay off high-interest debt or put it toward a down payment on a new house. However, you must be willing to give up 25% to 40% of your home’s appreciation to your investor.
What benefits does Point provide?
Point provides you with a lump sum of up to $500,000 that you can use at your discretion, without any monthly payments or interest. It invests in rental properties, while the competition does not. It also offers 30-year terms, so you have plenty of time to buy back your equity. There’s no income requirement and you can qualify with a 500 credit score, so it’s accessible.