Thanks so much Bill!

Hometap from what I can see takes their share "PLUS" a % of the sale price. So, is it really worth it?

I have to agree.  I might try to talk them into another option.  

A reverse mortgage sounds like a better idea, based on the limited info provided.  

What's your client trying to achieve?

They want to pay off credit card debt but don't qualify for a HELOC.  I told her I'd look into this but I'm thinking there must be a better way.

Better than selling 10% and having the lender participate in future appreciation?  I'd think so...try debt counseling and credit card debt consolidation.

I think it depends on the specifics of the situation.  I think that in many cases, selling 10% of your home (and being able to still live in it) is better than the MANY people that pay high credit card interest for many years.

I guess, maybe.... sure sounds awful all the way around.
Perhaps a hard money loan?

I really wasn't thrilled when she said she was thinking about it.  I told her I would look into the tax issue and tomorrow we are going to discuss alternative ideas.  They are also in trouble because her business went out this past year.  Lots of debt very little income.  I really do appreciate the input everyone.  The clients are really nice people and I want to do the best I can for them.

The website says that the term of the loan is ten years.  Also according to the website they can simply pay it off with savings, sell the house, or get another loan.  I don't know how old your clients are or what else is happening in their lives, but that cloud hanging over my head when that 10 year mark hits could be a little scary if I haven't won the lottery in the meantime.  This deal sounds like an option for folks, but to me it sounds like a last option.  I wish them luck in whatever they decide to do.

I think she's hoping to qualify for a HELOC before the 10 years is up.   Still seems awful to me.

You sound like you really care about your clients.  IF their credit is already impacted, I'd suggest they contact the credit card companies & negotiate.  And even if their credit hasn't yet been impacted, it might still make sense in the long run.  Credit can be rebuilt (in less than ten years...); giving up an equity stake in their home is scary. I'm assuming Hometap would have the ability to foreclose at the end of the ten year period.

I agree with abctax55... VERY Scary!!!.... there are much better ways to eradicate credit card debt than giving up equity as she indicated. I've read what a google search brings up and it's not much to go on.... I'd want to see the contract wording. IMO, it's no better than a reverse mortgage and there is no way to predict the IRS position on the characterization.  Credit card debt is unsecured....  period. I'd consider bankruptcy before going down this path.... lot cheaper and the healing is faster....