Key Takeaways
Eligibility depends on factors like equity, property type and lender rules; expect an appraisal, paperwork and possible fees.
They’re not the only option. Compare HEIs against home equity loans, HELOCs, cash-out refinancing, or reverse mortgages to find the best fit.
Check your home equity loan options. Start here
Thinking about a home equity investment? It’s a way to access cash from your home now without taking on debt, in exchange for a share of its future value. Here’s what you should know.
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What is a home equity investment?
A home equity investment, sometimes called an “equity sharing agreement”, lets you access upfront cash by selling a portion of your home’s equity, without taking on debt or monthly payments. Unlike refinancing or taking out a second mortgage, this option can be appealing in a high-rate environment.
Check your home equity loan options. Start here
How to qualify for a home equity investment
Sufficient equity: Most companies require at least 20–40% equity.
Eligible property: Your home must meet minimum value requirements and be in an approved location.
Credit check: Some providers review your credit, often with flexible minimums around 500+.
Mortgage restrictions: Certain lenders may not allow equity-sharing agreements, or may impose penalties.
Appraisal & paperwork: Be prepared to provide a recent appraisal, mortgage details, and insurance documents.
Fees & repayment: HEIs can include appraisal or origination costs, and repayment is tied to your home’s future value.
Due diligence: Compare multiple offers, read reviews, and consider professional advice before signing.
How do home equity investments work?
Here’s a step-by-step breakdown of how a typical home equity agreement works:
Verify your home equity loan eligibility. Start here
Apply and Get Approved: The homeowner applies for a home equity agreement with an investment company, which evaluates the property’s value, the homeowner’s equity, and other factors to approve the application.
Receive a Lump-Sum Payment: Once approved, the investment company provides the homeowner with a lump-sum payment. This amount is based on the agreed percentage of the home’s current value.
No Monthly Payments or Interest: Unlike a loan, the homeowner doesn’t make monthly payments or accrue interest. The agreement is a shared equity investment, not debt.
Term of the Agreement: The homeowner has a set time frame to fulfill the agreement, typically between 10 and 30 years. Alternatively, the agreement may end when the property is sold.
Settlement: When the agreement ends, either through a sale or at the end of the term, the homeowner settles by paying the investment company its agreed-upon share of the home’s appreciation (or, in some cases, depreciation).
This process offers homeowners immediate access to cash while sharing in the risks and rewards of future changes in property value.
What are the pros and cons of home equity investments?
Home equity investments come with both benefits and drawbacks, making it important to weigh the pros and cons before committing to an agreement. Here’s a quick breakdown to help you decide if this option aligns with your financial goals.
Verify your home equity loan eligibility. Start here
Alternative ways to get equity out of your home
A home equity investment isn’t the only way to access your home’s value. Depending on your needs, you might consider:
Home equity loan (HEL): A lump-sum second mortgage with fixed payments.
Home equity line of credit (HELOC): A revolving credit line you can draw from as needed.
Cash-out refinance: Refinance your primary mortgage while taking out equity.
Reverse mortgage: Available if you’re 62 or older.
These options may give you cash without giving up a share of your future home appreciation. Talk with a lender or financial advisor to find the best fit for your situation.
Comparing home equity options: HEI vs. HEL vs. HELOC
FAQ
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How is a home equity investment different from a home equity loan or line of credit?
Loans and lines of credit mean you borrow money and pay interest monthly. Home equity investments are more like partnerships where the investor shares the risk and reward with you. There’s no monthly payments, but they get a cut when the home’s value changes.
Who benefits most from home equity investments?
If you need cash but want to avoid monthly payments or adding more debt (maybe to cover big expenses, invest in yourself, or pay off high-interest debt), this could be a way to unlock your home’s value responsibly.
Are home equity investments risky?
Like all investments, there’s risk involved. If your home’s value drops, you could owe less to the investor. But if it goes up, you share that gain. It’s important to weigh these factors and make sure it fits your financial goals.
Can I stay in my home during a home equity investment?
Absolutely. You keep living in your home. It’s not like selling or refinancing. You’re just partnering with an investor behind the scenes.
What typically happens when the investment term ends?
You usually have a set period (say, 10 years) to buy out the investor’s share, refinance, or sell your home to repay them. Planning ahead here prevents surprises.
Are there fees or costs involved in home equity investments?
Yes, there can be startup fees or closing costs. Unlike loans, you won’t have monthly interest, but you should read the fine print carefully to understand all costs.
How do home equity investments affect my credit?
Since this isn’t a loan, it generally doesn’t impact your credit score or require monthly payments. That can be a relief if you’re managing other debts or aiming to improve credit.
Erik J. Martin has written on real estate, business, tech and other topics for Reader’s Digest, AARP The Magazine, and The Chicago Tribune.
Aleksandra is an editor, finance writer, and licensed Realtor with deep roots in the mortgage and real estate world. Based in Arizona, she brings over a decade of experience helping consumers navigate their financial journeys with confidence.