Understanding Home Equity Agreements: A New Way to Access Your Home's Value
Discover how Home Equity Agreements (HEAs) and Home Equity Investments (HEIs) offer homeowners a new path to unlock their property's value without traditional loans. At InvestorsAdvocate.org, we provide unbiased education on these innovative financial tools.
Understanding Home Equity Agreements (HEAs)
What is an HEA?
A Home Equity Agreement allows you to sell a portion of your future home value in exchange for immediate cash. Unlike loans, there are no monthly payments – the investor shares in your home's appreciation (or depreciation).
For example, you might receive $50,000 today in exchange for 20% of your home's future value, with the agreement settled when you sell or refinance.
How Home Equity Investments (HEIs) Work
Initial Agreement
You receive upfront cash in exchange for a share of your home equity. Most agreements have a 10-year term.
Ownership Period
You continue living in your home with no monthly payments while the investor maintains a stake in your property.
Value Changes
The investor profits if your home increases in value or shares in the loss if the value decreases.
Settlement
At the end of the term, you pay the investor their agreed-upon share, either by selling, refinancing, or using savings.
Benefits of HEAs and HEIs
No Monthly Payments
Unlike traditional loans, HEAs and HEIs don't require regular payments, reducing your financial burden while you access your equity.
Access Without Debt
Get cash from your home's value without technically adding debt to your balance sheet or affecting your debt-to-income ratio.
Flexible Fund Usage
Use the funds for anything from home renovations and repairs to debt consolidation, education expenses, or retirement needs.
Shared Risk
When home values decline, investors share in the loss, potentially reducing your financial exposure compared to loans.
Risks and Downsides
Lost Appreciation
You forfeit future home value growth on the portion you sell
Value Volatility
Market downturns can complicate repayment strategies
Complex Terms
Fee structures and agreement details require careful review
Limited Availability
Not all states or property types qualify for these agreements
HEAs/HEIs vs. Traditional Equity Options
Is an HEA/HEI Right for You?
Assess Your Financial Situation
Consider your current income, expenses, credit score, and long-term financial goals. HEAs may be especially attractive if you have limited income but substantial home equity.
Calculate Potential Outcomes
Use modeling tools to estimate how much you might pay at the end of the term under different home appreciation scenarios. Compare this to traditional loan costs.
Compare Multiple Offers
Review terms from different providers, paying close attention to fees, percentage of equity shared, and term length. Small differences can have major impacts.
Consult Financial Advisors
Speak with independent financial professionals who can provide unbiased advice about whether an HEA aligns with your long-term financial strategy.
Top Home Equity Sharing Companies
Unlock: Best for Investors
Access equity with just 20% equity stake required—lowest in the industry.
- Low 500 minimum credit score
- Multiple property types including rentals
- $30,000-$500,000 available in 13 states
Splitero: Best Perks
Flexible payoff terms aligned with your primary mortgage.
- Affiliated brokerage helps maximize sale value
- Available for owner-occupied properties
- Up to $500,000 (25% of home value)
EquityChoice: Best Alternative
Shared appreciation mortgage combines traditional loan with equity sharing.
- Low 3% upfront fee
- Below-market interest rates
- Available in 19 states for primary residences
Top Home Equity Sharing Companies
Point: Best Overall
Offers wide availability in 26 states, low 3.9% upfront fee, and a generous 30-year payoff term. Minimum credit score of 500 with loan amounts from $30,000 to $500,000 (up to 20% of home value).
Hometap: Best for Large Amounts
Features the lowest upfront fee (3.5%) and highest loan amounts (up to $600,000) among competitors. Available in 17 states with a 10-year term and accommodates various property types including vacation homes.
Unison: Best for Good Credit
Ideal for homeowners with credit scores of 680+, offering below-market interest rates and a low 3% origination fee. Available in 7 states with loan amounts from $30,000 to $400,000 (up to 35% of home value).