Point Home Equity Review

If you're interested in getting a home equity loan but are getting nowhere because of income requirements or a low credit score, you may want to consider a home equity investment as an alternative. While traditional home equity loans use your home as collateral in order to issue you a loan you pay back in installments, a home equity investment takes partial ownership of your home's equity and issues you a lump sum that does not have to be paid back in monthly installments.

One company that offers home equity investments is Point. Keep reading to learn more about how a Point home equity investment works and why it may or may not be the right choice for you.

Best home equity offering with no income requirement

Unlike most home equity loans, there is no income requirement to qualify for Point's home equity investment offering. This makes it a potential solution if you need cash but can't qualify for a traditional home equity loan or cash-out refinance.

Point home equity pros and cons

Pros explained

No monthly repayments

A Point home equity investment (HEI) is different from a traditional home equity loan or home equity line of credit (HELOC). With a traditional home equity loan, you borrow against your home's equity and make monthly loan repayments to pay off the debt. With an HEI, you get cash in exchange for giving up a portion of your home's equity, or the difference between your home's current value and the mortgage balance. As a result, you don’t have to make any repayments for the entirety of your 30-year agreement with Point, which means you won't need to worry about additional expenses on top of your mortgage payments during that time.

When you receive your lump sum from Point, you'll sign into an agreement that Point is entitled to a portion of your home's equity at the end of the 30 years or when you choose to sell your home, whichever comes first. In other words, Point will either receive a portion of the sale of your home or be entitled to a repayment from you. You can also decide to exit the partnership before the full term and buy back the equity depending on the value of your home at the time.

No income requirements

Point doesn't have any income requirements for its HEI product. Conversely to qualify for a HELOC or home equity loan you'll need to show stable, sufficient income as evidence you’ll be able to meet the repayment terms.

Furthermore, while getting a HELOC or home equity loan with bad credit is difficult, it's much more likely with an HEI. Point's minimum credit score requirement is 500, generally it's around 650 to 680 for home equity loans and HELOCs.

Because Point doesn't technically loan you money — rather, it purchases a portion of your home's equity — an HEI with Point won't impact your credit score or your debt-to-income ratio.

Ability to buy back your equity

You retain the right to buy back your home's equity from Point even if you're not selling your home. This means that if your financial situation improves, you can exit the equity-sharing agreement early.

However, the value of your home will affect how much you're required to pay back to Point. If your home's value has increased, you will be expected to give Point a share of that gain. If your home has depreciated in value, Point also shares in that loss, and you might end up paying less than the initial lump sum you received.

Cons explained

You surrender a portion of the equity of your home

With a Point home equity investment, you are signing over a portion of your home's equity. This means that you might not be able to take full advantage of your home's value if it appreciates.

With a traditional home equity loan, you receive a lump sum of cash, but you still retain complete ownership of the equity of your home. While Point will not be added as an owner on the title of your home, you'll be signing into an equity-sharing agreement. As a result, if your property value rises, Point will share in your additional equity. Thus you might end up paying more than what you initially received as your cash lump sum depending on the terms of your agreement.

Lower appraisal value of your home

When you apply for Point's equity funding, Point will appraise the value of your home. However, it will automatically lower your home's appraisal by 20% to 25%. That means that when Point assesses what share of your home's equity it's entitled to, the overall total value of your home is judged lower than what it would otherwise be worth. This risk-adjusted value safeguards Point against fluctuations in the market.

Point home equity offerings

Currently HEIs are the only financial product offered by Point, but the company is taking waiting list applications for its SEED down payment investment. Point does not offer home equity loans or HELOCs.

Home equity investment

Point's home equity investment product offers you a lump sum of cash in exchange for a portion of your home's equity. A Point representative will determine the equity percentage you'll owe based on your specific situation. Unless you choose to sell your home or buy your equity back from Point before the end of your contract, you will have 30 years before Point collects its share.

SEED down payment investment

While they aren't currently available, Point will soon be offering SEED down payment investments. These investments are similar to the Point home equity investment but are geared toward new homebuyers. With a SEED investment, Point helps to fund your initial down payment in exchange for a portion of your home's equity. It's just like the HEI, except Point is helping you fund your down payment rather than investing in a home you already own.

However, as with the Point HEI, carefully consider the terms to which you're agreeing. While there are several advantages to being able to put down a larger down payment, ultimately you are signing away a slice of your home's equity, which you could come to regret should your home radically appreciate in value.

Point has not yet definitively stated when it will launch the SEED program.

Point home equity pricing

Because Point's home equity investment isn't a traditional loan, you won't be responsible for fixed or variable interest rate payments. However, there are some fees associated with the HEI program. Some of the most common fees Point charges include:

• A $45 fee for documents when Point releases its claim on the property
• A $30 fee when Point prepares a payoff demand statement
• A $250 fee when any changes are made to the title of the property
• A $500-$800 fee for the appraisal as part of your closing costs
• $500-$3,500 in administrative fees should the owner default

You'll also pay a 3.9% processing fee on the lump sum you receive upfront from Point, with a $1,000 minimum, as well as other 3rd party closing costs.

Point home equity financial stability

Point has received a rating of B1 from Moody's. This means that the company isn't considered financially stable and may present high credit risks.

Point home equity accessibility

Availability

Point is available to homeowners in Washington, D.C., and the following 26 states:

• Arizona
• California
• Colorado
• Connecticut
• Florida
• Georgia
• Hawaii
• Illinois
• Indiana
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Missouri
• New Jersey
• New York
• North Carolina
• Ohio
• Oregon
• Pennsylvania
• South Carolina
• Tennessee
• Utah
• Virginia
• Washington
• Wisconsin

Contact information

To get in touch with a Point representative, you can call the company's customer service at 1-(888) 764-6823 from Monday through Thursday, 6 a.m. to 6 p.m. or Friday, 6 a.m. to 4 p.m. You can also fill out a customer inquiry form on Point's website and wait for a customer service rep to be in touch.

User experience

According to online reviews, Point's services are easily accessible online.

You can fill out an online application to qualify for pre-approval and apply for an HEI. In addition, you can find articles about how HEIs work and how they differ from home equity loans and HELOCs on Point's website.

Point home equity customer satisfaction

Point currently has a 4.28 out of 5 stars for customer satisfaction on the BBB website. The BBB has also given Point an A+ rating. The majority of customers claim to have had good experiences with the company — many praise the employees who assisted them during the application process. However, several reviewers of Point complained that customers felt like they needed to jump through hoops when they attempted to buy Point out before the end of their 30-year term.

How we evaluated Point home equity investments

In evaluating Point home equity, we examined the following factors:

• Applicant requirements
• Terms and rates
• Value and payment considerations when compared to more traditional home equity loans
• Customer reviews

Summary of Money's Point home equity review

Giving up a portion of the equity in your home in exchange for a lump sum payment might be beneficial, especially if you need an influx of cash but want to avoid monthly repayments or don't qualify for traditional home equity loans. However, unlike conventional home equity products, a Point HEI requires you to surrender a portion of your home's equity, with a reduced appraisal value of your property to boot.