A startup that allows homeowners to access their equity without taking on more debt has raised $60 million to fund its continued expansion.
Hometap on Dec. 6 announced the funding raise, which will go toward adding new employees, rolling out products and partnering with Realtors, mortgage brokers and other industry professionals.
“Since we made our first investment in Hometap in 2018, we’ve strongly believed in its mission to give homeowners a more accessible way to create liquidity and financial flexibility from what is oftentimes their largest asset,” Dan Reed, managing director of American Family Ventures, said in a press release.
Reed’s company led this round of funding, with Bain Capital, Iconiq Capital, G20 Ventures, Pillar and General Catalyst joining as well.
The company had previously raised $35 million in operating capital, bringing the total amount raised for this purpose to $95 million.
For homeowners considering tapping into their home’s equity, the options have typically involved taking out a new loan, such as a home equity line of credit. These loans use the home’s equity as collateral.
But under Hometap’s model, an investor essentially buys a share of the home’s future value, providing cash up front for the homeowner. When the home sells, the investor makes their money back. Homeowners can also settle with the investor without selling the property.
When accessing their equity, homeowners often use it to pay off higher-interest debts like those from credit cards. Other common uses include starting a business, buying an investment property or funding expensive home-improvement projects on their primary residence.
Hometap and its investors are aiming to capitalize on the growing share of homeowners with substantial equity, as tracked in various national reports.
As home prices have risen during the frantic pandemic home market, the share of mortgaged homes that are “equity rich” has risen. As defined by Attom Data Solutions in its quarterly report, an “equity rich” home is one in which the mortgage debt amounts to less than half the property’s value.
Amid this growing field of opportunity, Hometap has made strides in its operations expansion, CEO Jeffrey Glass said in a statement.
The company facilitated four times as many investments from Jan. 1 through Oct. 31 as it did in the same period the previous year, while doubling the size of its staff, according to the release.
“I am excited about our growth trajectory and am truly grateful to our team for working tirelessly to put homeowners first as we continue to scale the business,” Glass said in the statement.