If you’re a homeowner and have a significant amount of equity in your home, a home equity line of credit (HELOC) may come to mind when you need extra money.
Homeowners have long viewed HELOCs as fairly reliable ways to leverage the cash value they’ve built in their homes.
But since the beginning of the epidemic Lenders have been less willing to offer HELOCs For homeowners. Some banks have suspended their HELOC programs completely while others have tightened their credit requirements.
While many banks hope to make HELOCs more widely available in the near future, getting one now may be difficult. However, there are HELOC alternatives that can provide the access to cash you’re hoping for. Below, we break down each of these options and list a few of the top companies that may be worth checking out.
5 Best HELOC Alternatives
Let’s explore our top 5 options for HELOC alternatives. Four of these options are home equity investment companies while the fifth option is a sale and leaseback company.
Hometab
Hometap also offers homeowners a cash investment in exchange for some of their home equity. However, it stands out from some of its competitors by only having a low minimum credit score of 500.
The investment you make with Hometap must be less than 30% of the value of your home. Additionally, there is a maximum investment of $600,000 for any given property.
It is important to note that with Hometap you must settle the investment within 10 years. So, if you don’t think you’ll be able to sell the property or purchase a Hometap within this time frame, you should probably look at a different HELOC alternative.
a point
a point This is another investment company that will buy a portion of your home equity for cash. You’ll need to build up at least 20% home equity to receive an investment from Point, but the company prefers you have at least 35% home equity.
One big advantage of Point it is that it will invest in some rental properties that have a maximum of 4 units. But it’s worth noting that the company uses “risk adjustments” to immediately reduce your home’s estimated value by 15% to 20%, which is a big downside.
Typically, you will receive a decision from Point within minutes. At this point, you can go ahead and accept their cash investment offer. You’ll pay Point back when you sell your home, reach the end of a 30-year agreement, or decide to buy back your Point shares.
to open
HELOC is a home equity agreement that serves as an alternative to a HELOC. However, it stands out from some of its competitors by only having a low minimum credit score of 500.
You must have at least 20% home equity to take advantage of the Unlock feature. You can get anywhere from $30,000 to $500,000, depending on how much equity you have in your home.
It is important to note that with unlock, you must settle the investment within 10 years. So, if you don’t think you’ll be able to sell the property or purchase Unlock within this time frame, you should probably look at a different HELOC alternative.
harmony
harmony Offers homeowners investing in home equity as an alternative to HELOCs. The company is willing to make investments in your home ranging from $30,000 to $500,000. But the investment value should not exceed 15% of the current value of the house.
The great thing about these types of investments is that no monthly payments are required.
If you work with Unison, there is an upfront transaction fee of 3.9%. This can make this an expensive option compared to a regular HELOC. The upside is that you won’t have to repay Unison until you sell the house, 30 years have passed, or you simply want to buy it.
Easy knock
With EasyKnock’s Leaseback and Sellback programs, you can sell your home to them, get a percentage of the purchase amount in cash upfront, and the rest when they buy it back or tip you Easy knock To be sold on the open market. In the meantime, you will continue to live in your home as a renter. So, although EasyKnock doesn’t technically require monthly payments, you will have to start paying rent.
with sell and stay, You can get up to 85% of your home’s current value in cash now and the remaining 15% when you order EasyKnock to sell or buy back your home. If you go the sale route and your home sells for more than EasyKnock agreed to pay you, you keep the difference. The initial lease is 12 months, but you can renew it indefinitely.
motility It allows you to access up to 90% of your home’s value immediately and you will once again have the ability to gain appreciation when it is sold on the market. But unlike See & Stay, you won’t have the option to buy back your home. The maximum lease term with MoveAbility is 12 months. This can be a great option if you want to avoid the hassle and expense of moving while searching for a new home.
Such as MoveAbility, He releases It also allows you to get up to 90% of your home’s value in cash and there is no buyback option. The advantage of ReLease is that you can rent for as long as you want. The minimum lease is 24 months, but you can renew indefinitely. The downside is that ReLease is the only EasyKnock program that doesn’t allow you to get an estimate on the future sale of your home.
Bonus: Credible personal loans
If you need a smaller amount, you can get a personal loan of up to $100,000 from the trusted market without using your home at all. You’ll generally need a good credit score to get a favorable rate on a personal loan. But if your credit is strong, unsecured personal loans may be a useful alternative to a HELOC.
With Credible, you can compare your personal loan options from over 15 lenders in minutes. When you take out a personal loan, you will need to make regular monthly payments. But the free platform can help you find a loan term that fits your budget. The cash will not be tied to your home equity in any way.
HELOC Alternatives: Breakdown
HELOCs may be difficult to obtain right now. But there are plenty of other ways to take advantage of the equity you’ve built in your home. Here are some options to consider:
- Home equity investments: With this option, you receive an upfront investment from a company in exchange for sharing a percentage of the future appreciation or depreciation of your home.
- Leaseback sale: With these loans, you can sell your home and the buyer allows you to remain as a renter until you are ready to move or decide to buy your home again (if allowed). Technically, you don’t have to make the loan payments through a sale leaseback, but you will have to pay rent.
- Home Equity Loan: Unlike a HELOC, a home equity loan is a one-time transaction followed by regular monthly payments.
- Cash-out refinancing: Refinancing your mortgage can allow you to take the equity out of the home and start making payments on a new mortgage loan.
- Unsecured personal loans: An unsecured personal loan will not require you to put your home on the line. Alternatively, you can get a fixed amount to pay back in regular instalments.
- Reverse mortgage: This type of loan is often marketed to retirees as a way to access their home equity without having to move. There are no monthly payments with A Reverse mortgage. Instead, the balance is paid off when the homeowner sells their home, moves, or dies.
- Sell the house: If you need money and can’t get a loan, selling your home can provide the money you need. Additionally, depending on the market, you may have a large windfall to help you cover the rent for a while.
Final thoughts
A HELOC can be a useful way to leverage your home equity. But if traditional mortgage lenders aren’t willing to help you access that equity, you’ll need to look for a different option.
Before you dive into a HELOC alternative, weigh your other options. Is it possible to cover these expenses with a short-term side hustle or by withdrawing your savings? If so, you may be able to avoid the process of selling your home equity or taking out a personal loan.
If access to cash is a priority, keep fees in mind as you explore your HELOC alternatives. Don’t overpay for the opportunity to cash in on your home equity
