Last updated: August 2026 | By the RateRoots Home Equity Editorial Team | Reviewed for accuracy against provider disclosures, the Consumer Financial Protection Bureau, (learn more about conventional loan requirements 2025) (learn more about can i refinance with negative equity?) (learn more about how to refinance with negative equity?) (learn more about what is unified reliance wholesale (urw)? mortgage lender overview | rateroots) (learn more about how to get business expansion loan?) (learn more about getting a business line of credit with bad credit: options and guidance) and 2026 state legislation
A home equity agreement (HEA) is a contract in which a company gives you a lump sum of cash today in exchange for a share of your home's future value. It is not a loan: there are no monthly payments and no interest rate. Instead, you settle the agreement years later — when you sell, refinance, buy the company out, or reach the end of the term — by repaying the original cash plus the investor's agreed share of your home's value at that time. Because the payoff is tied to your home price rather than an interest rate, an HEA can be cheaper than a loan if your home barely appreciates, and far more expensive if it climbs.
This guide explains exactly how home equity agreements work in 2026, what they cost, who they fit, the traps to avoid, and how they compare to a HELOC, a home equity loan, and a cash-out refinance. Home equity agreements are also marketed as home equity investments (HEIs) and shared appreciation agreements — the terms are largely interchangeable, and this guide treats them as one product category.
A note on scope: This is educational content, not financial, legal, or tax advice. Home equity agreements are complex, long-dated contracts secured against your most valuable asset. Read every provider's contract in full and consult a licensed advisor or housing counselor before signing.
What Is a Home Equity Agreement?
A home equity agreement is an arrangement between a homeowner and an investment company. You receive cash upfront — typically anywhere from $15,000 to $600,000, depending on your equity — and in return you agree to give the company a percentage of what your home is worth when the contract ends.
The defining features are what the HEA is not:
- It is not a loan. You do not borrow a principal balance and pay it back with interest.
- There are no monthly payments. Nothing is due until you settle.
- There is no stated interest rate. The company's return depends on your home's price.
What the company receives instead is an equity stake in your property, usually recorded as a lien or a "performance deed" so it can be repaid when the home is sold or refinanced. In plain terms, you are selling a slice of your home's future for money you can use today.
Homeowners typically reach for an HEA in a handful of situations: they have substantial equity but limited income, so they can't qualify for or comfortably afford a monthly loan payment; they want to avoid adding to their monthly bills in a high-rate environment; they are self-employed or retired with income that is hard to document; or they simply prefer not to take on new debt. The product has grown quickly as mortgage rates pushed many owners away from cash-out refinancing and toward equity-access alternatives that don't disturb a low first-mortgage rate.
How a Home Equity Agreement Works
The mechanics follow a predictable sequence, and understanding each step is the difference between a good decision and an expensive surprise.
1. Application and home valuation. You apply, and the company assesses your home's current value, usually through an appraisal or a third-party valuation. This starting value is the anchor for everything that follows.
2. The risk adjustment (the part people miss). Most providers do not use your home's full appraised value as the baseline. They apply a risk adjustment — a discount to your home's starting value — before calculating their eventual share. Across the industry this discount ranges from a few percentage points to nearly 30%. If your home appraises at $500,000 and the company applies a 20% risk adjustment, it calculates its future share as though your home started at $400,000. A lower baseline means the company captures more of the upside, so the risk adjustment is one of the single most important numbers in any HEA offer.
3. The offer: cash amount and equity share. The company offers you a lump sum in exchange for a defined percentage. The share you give up is generally larger than the percentage of value you take in cash. For example, you might receive 10% of your home's value in cash but owe the company 15–25% of the home's value at settlement — that spread is the company's compensation for putting up money now and waiting years to be repaid.
4. Closing. You sign, the lien is recorded, and the cash is wired — minus fees, which are deducted from your proceeds rather than billed separately.
5. The term. You live in the home, keep paying your existing mortgage, property taxes, and insurance, and maintain the property. Most HEAs run 10 years, though some providers offer terms as long as 30 years.
6. Settlement. You settle the agreement in one of four ways: selling the home (the company is paid from the proceeds), refinancing or taking out a new loan large enough to buy the company out, using savings or other funds to buy out the stake before the term ends, or reaching the end of the term, at which point payment comes due and often forces a sale or refinance if you can't pay from other sources.
At settlement, the company is re-valued against your home's then-current price. You repay the original cash plus the company's share of your home's value (or of its appreciation, depending on the structure — see below).
The Two Payoff Structures: Share of Value vs. Share of Appreciation
Not all home equity agreements calculate the payoff the same way, and the difference can be tens of thousands of dollars. There are two dominant models.
Share of total value. The company owns a percentage of your home's entire value at settlement, not just the growth. Providers such as Hometap use a share-of-value model. If you owe 15% of the home's value and the home is worth $500,000 at settlement, the company's claim is $75,000 — regardless of what the home was worth when you started. This model can be more expensive because the company participates in value you already had before the agreement began.
Share of appreciation. The company is repaid the original cash plus a percentage of the gain above the risk-adjusted starting value. Providers such as Point and Unison lean toward appreciation-based structures. Here you keep all the value that existed at the start; the company only shares in the increase.
A simple worked example makes the mechanics concrete. Say your home is worth $200,000. An HEA company gives you $20,000 for a stake, applies a 10% risk adjustment, and the home is worth $400,000 when you settle. Under a common structure, you would repay the original $20,000 plus the company's share of the appreciation above the discounted baseline — which in this illustration works out to roughly $60,000 total. You received $20,000 and repaid $60,000, meaning the appreciation you handed over ($40,000) dwarfs any upfront fee. The appreciation share, not the origination fee, is almost always the real cost of a home equity agreement.
Because the structures differ, never compare two HEA offers on the cash amount alone. Model each one against several possible future home values — flat, moderate growth, and strong growth — and compare the total dollars you would repay in each scenario.
Types of Home Equity Access (and Where HEAs Fit)
A home equity agreement is one of several ways to convert equity into cash. Understanding the full menu clarifies when an HEA is the right tool.
Home equity agreement / investment (HEA/HEI). Lump sum, no monthly payments, no interest, repaid as a share of future value. Qualification is driven by equity, not income.
Home equity line of credit (HELOC). A revolving credit line secured by your home, with a draw period and variable interest. You borrow as needed and make monthly payments. Requires income and credit qualification.
Home equity loan (second mortgage). A lump sum repaid over a fixed term at a fixed interest rate with predictable monthly payments.
Cash-out refinance. You replace your existing mortgage with a larger one and take the difference in cash — which resets your first-mortgage rate, a significant drawback if your current rate is low.
Reverse mortgage. Available to homeowners 62 and older, this converts equity into payments or a line of credit with no required monthly repayment, repaid when you leave the home. Notably, the reverse-mortgage comparison has become legally significant: at least one state attorney general has argued that certain HEAs function like unlicensed reverse mortgages.
The through-line: loans (HELOC, home equity loan, cash-out refi) trade monthly payments and interest for predictable costs, while HEAs trade a share of your appreciation for zero monthly cost. Which is cheaper depends entirely on how much your home gains over the term.
Benefits and Drawbacks of a Home Equity Agreement
Home equity agreements solve real problems, but they carry real risks. An honest accounting matters more here than with almost any other financial product, because the downside is measured against your largest asset.
The benefits.
No monthly payments. This is the headline advantage. For a homeowner on a fixed income or with irregular cash flow, removing a monthly obligation can be decisive.
Easier qualification. HEAs are equity-based, so income and debt-to-income requirements are looser and credit-score minimums are lower — commonly in the 500–600 range depending on the provider, versus higher thresholds for loans.
You share downside risk. If your home loses value, most HEA structures mean the company shares the loss with you. A lender, by contrast, is owed its full principal regardless of what happens to your home price.
No rate risk. Because there's no interest rate, a rising-rate environment doesn't increase your cost — and you don't disturb a low existing first-mortgage rate the way a cash-out refinance would.
The drawbacks.
The cost is unpredictable and can be very high. Your total cost rides on home appreciation, which no one can forecast. In a strong market, the dollars you hand over can far exceed the interest you'd have paid on a loan.
You give up upside on your biggest asset. Every dollar of appreciation the company takes is a dollar you don't keep — appreciation you might have needed for retirement, a move, or an inheritance.
The risk adjustment reduces your effective proceeds. The discount to your starting value quietly increases the company's take.
Settlement can force a sale. If you can't buy out the stake at the end of the term from savings or a refinance, you may have to sell the home to settle.
Fees are real. Origination fees typically run 3–5% of the cash advance (often around 4.9%), plus appraisal and closing costs, all deducted from your proceeds.
The legal and regulatory picture is unsettled. As of 2026, several states and federal lawmakers are moving to regulate these products more like loans, and litigation is ongoing.
How to Get a Home Equity Agreement: Step by Step
If you've weighed the trade-offs and want to proceed, here is the practical path.
1. Confirm you have enough equity. Providers generally want you to retain meaningful equity after the investment. Estimate your home's value and subtract your mortgage balance to gauge what you're working with.
2. Get quotes from multiple providers. Because structures differ so much, request offers from several companies and insist on seeing the full terms, not just the headline cash number.
3. Compare the four numbers that matter. For every offer, pin down: the cash amount, the risk adjustment (starting-value discount), the company's percentage share, and whether the payoff is a share of total value or a share of appreciation. These four numbers, not the marketing, determine your cost.
4. Model the settlement math. Run each offer against flat, moderate (about 3% per year), and strong (about 6% per year) appreciation scenarios over the term. Look at total dollars repaid in each case.
5. Check the exit terms. Confirm whether early buyout is allowed, whether there's a prepayment penalty, and whether partial buyouts are permitted. Some providers allow you to buy back equity gradually; others don't.
6. Read the contract and get independent advice. Have a real-estate attorney or a HUD-approved housing counselor review the agreement before you sign. This is a multi-year lien on your home — the review is worth it.
7. Close and keep documentation. Once signed, keep every disclosure and the recorded lien on file so settlement years later is clean.
What to Look For When Choosing a Provider
This is a decision framework, not a ranked list — the "right" provider depends on your home, your timeline, and your tolerance for cost uncertainty.
The risk adjustment. All else equal, a smaller discount to your starting value is better for you. Ask for it in writing and compare it across offers.
The payoff structure. Decide whether a share-of-appreciation or share-of-total-value model fits your outlook. If you expect meaningful appreciation, an appreciation-only structure with a fair baseline often costs less than a total-value structure.
The term length. Longer terms give you more time before settlement but also more time for appreciation — and therefore the company's share — to grow.
Buyout flexibility. Prioritize providers that allow early buyout without penalty and, ideally, partial buyouts, so you retain control of your exit.
Fees. Compare origination and closing fees, remembering they come out of your proceeds.
Occupancy and property rules. Understand the maintenance, insurance, and occupancy requirements, and what happens if you want to renovate (improvements can affect valuation at settlement).
Transparency and standing. Favor providers that disclose their full methodology, provide clear worked examples, and have an established operating history.
Common Mistakes to Avoid
Focusing on the cash, ignoring the share. The lump sum is the easy part to understand and the least important. The equity percentage and payoff structure determine what you actually pay.
Overlooking the risk adjustment. A homeowner who compares two offers only by cash amount can unknowingly choose the one that quietly discounts their starting value by 20% or more.
Assuming flat appreciation. People model an HEA as though their home won't grow much — and then it does, and the bill is far larger than expected. Always model an appreciating market.
Treating it like "free money." No monthly payment does not mean no cost. The cost is simply deferred and tied to your home price.
Ignoring the exit. Homeowners who don't plan how they'll settle can be forced to sell at the end of the term.
Skipping independent review. These are dense, long-dated contracts. Not having an attorney or counselor read it is a costly shortcut.
Costs and Pricing: What a Home Equity Agreement Really Costs
Home equity agreement costs come in two buckets: the upfront fees you can see, and the appreciation share you can't fully predict.
Upfront costs. Origination fees typically run 3% to 5% of the cash advance, most commonly around 4.9%, deducted directly from your proceeds at closing. On top of that, expect an appraisal or valuation fee, plus processing and settlement/closing costs. On a $100,000 advance, upfront fees can easily total $5,000 or more before you factor in appraisal and closing.
The appreciation share (the big one). This is the cost that dwarfs the fees. Because you owe the company a percentage of your home's value at settlement, the faster your home appreciates, the more you pay. In our earlier example, a $20,000 advance turned into a $60,000 settlement — an effective cost far higher than the origination fee alone.
How the total compares to a loan. Whether an HEA beats a loan comes down to appreciation. In a flat or falling market, an HEA can be cheaper than years of loan interest — and you share the downside. In a strongly appreciating market, the appreciation share can make an HEA one of the most expensive ways to access equity. Because the cost is contingent on an unknowable future price, HEAs are inherently less predictable than a fixed-rate loan, where you know the total interest on day one.
A practical rule: before signing, calculate the implied annual cost of the HEA under several appreciation scenarios and compare it to the interest rate on a HELOC or home equity loan for the same cash. If the implied cost in a normal-appreciation scenario is dramatically higher than a loan rate, the HEA is buying you payment relief and easier qualification at a steep price — which may still be worth it, but you should know the number.
The 2026 Regulatory Landscape
The legal treatment of home equity agreements is in active flux in 2026, and it directly affects consumer protections. Historically, many providers argued that HEAs are investment contracts or property arrangements rather than loans, which kept them outside mortgage-lending rules and disclosures. That position is now under sustained pressure.
State action. Maine became the first state to comprehensively regulate these products: Governor Janet Mills signed legislation (LD 1901) classifying shared appreciation agreements as mortgage loans subject to state oversight, with emergency provisions bringing shared-appreciation mortgages within Maine's Consumer Credit Code in April 2026. Connecticut, North Carolina, and Pennsylvania have also moved to treat HEIs as a subset of existing mortgage or consumer-credit law — Connecticut's disclosure requirements for shared appreciation agreements took effect October 1, 2025.
Federal action. At the federal level, lawmakers introduced the Home Equity Lending Integrity Act (Senate Bill 4803) in June 2026 to bring HEI products under the Truth in Lending Act, which would require loan-style disclosures. The Consumer Financial Protection Bureau has separately signaled, through litigation filings, that it views at least some of these products as credit subject to federal consumer-protection law.
Litigation. The most prominent case is in Massachusetts, where the state attorney general sued a major provider, alleging its product functions as an illegal, unlicensed reverse mortgage. The case remained in discovery in 2026.
The takeaway for homeowners: the disclosures and protections you receive may depend heavily on your state, and the ground is shifting. Confirm how your state treats these agreements, and read every disclosure carefully.
Is a Home Equity Agreement Right for You?
A home equity agreement tends to fit homeowners who have significant equity but limited or hard-to-document income, who need cash without a new monthly payment, who want to preserve a low first-mortgage rate, and who are comfortable trading a portion of future appreciation for that flexibility. It fits less well for homeowners who expect strong appreciation and want to keep it, who can comfortably qualify for and afford a HELOC or home equity loan (often the cheaper option in an appreciating market), or who may struggle to settle the agreement at the end of the term.
If a monthly payment is the obstacle, an HEA solves it — but at a cost that scales with your home's success. If you can qualify for and service a loan, compare the two carefully before assuming "no monthly payment" means "cheaper." The right answer is the one that costs you the least across the realistic range of future home values, not the one with the most attractive headline.
Frequently Asked Questions
What is a home equity agreement in simple terms?
It's a deal where a company gives you cash now in exchange for a share of your home's value later. You make no monthly payments and pay no interest; you settle years down the road when you sell, refinance, buy the company out, or reach the end of the term.
Is a home equity agreement a loan?
No. There is no borrowed principal, no interest rate, and no monthly payment. The company takes an equity stake in your home and is repaid a share of its value at settlement. That said, some states are now moving to regulate HEAs like loans.
How much money can I get from an HEA?
It varies by provider and your equity, but advances commonly range from about $15,000 up to $600,000. The amount depends on your home's value, your existing mortgage balance, and how much equity the company will let you access.
How long does a home equity agreement last?
Most terms run about 10 years, though some providers offer terms up to 30 years. You can usually settle earlier by buying out the company, selling, or refinancing.
How do I pay back a home equity agreement?
You settle in one of four ways: selling the home, refinancing or taking a new loan to buy out the stake, using savings to buy it out, or reaching the end of the term. At settlement you repay the original cash plus the company's agreed share of your home's value.
What is a risk adjustment or discounted home value?
Many providers discount your home's starting value — often by anywhere from a few percent up to nearly 30% — before calculating their share. A lower baseline increases the company's eventual take, so it's one of the most important terms to compare.
How much does a home equity agreement cost?
Two costs apply: upfront fees (an origination fee typically 3–5% of the advance, often around 4.9%, plus appraisal and closing costs), and the appreciation share paid at settlement. The appreciation share is usually the far larger cost and depends on how much your home gains in value.
Can an HEA cost more than a regular loan?
Yes. In a strongly appreciating market, the share of value you hand over can exceed the interest you would have paid on a HELOC or home equity loan. In a flat or declining market, an HEA can be cheaper — and you share the downside.
What credit score do I need?
Requirements are lower than for loans because HEAs are equity-based. Minimums commonly fall in the 500–600 range depending on the provider, though the offer terms still depend on your home and equity.
What happens if my home loses value?
In most structures, the company shares the loss with you, so you may owe less than you received. This downside protection is a genuine advantage of HEAs over loans, where you owe the full balance regardless.
Can I still sell or refinance my home during the agreement?
Yes, but the company's stake must be settled as part of the transaction. When you sell, the company is paid from the proceeds; when you refinance, you typically need enough cash out to buy out the stake.
Do I keep paying my mortgage, taxes, and insurance?
Yes. An HEA sits on top of your existing obligations. You remain responsible for your mortgage, property taxes, homeowners insurance, and maintenance throughout the term.
Is a home equity agreement the same as a reverse mortgage?
No, though they share the "no monthly payment" feature. A reverse mortgage is a regulated loan available to homeowners 62 and older. An HEA is an equity-sharing contract available to a broader age range. Notably, some regulators have argued certain HEAs function like reverse mortgages — a live legal question in 2026.
Are home equity agreements regulated?
Increasingly, yes. As of 2026, Maine, Connecticut, and other states have moved to regulate these products under mortgage or consumer-credit law, and federal legislation has been introduced to bring them under the Truth in Lending Act. Protections vary by state.
Should I choose an HEA or a HELOC?
Choose based on cost across realistic scenarios and on whether you can afford a monthly payment. A HELOC or home equity loan is often cheaper in an appreciating market but requires income, credit, and monthly payments. An HEA removes the monthly payment and eases qualification but can cost more if your home appreciates strongly.
The Bottom Line
A home equity agreement lets you turn part of your home's future value into cash today without a monthly payment or an interest rate — a genuine solution for equity-rich, cash-flow-constrained homeowners. But the trade is real: you give up a share of your appreciation, the total cost is unpredictable and can be steep in a rising market, and the risk adjustment and payoff structure quietly determine what you'll owe. Model the settlement math across several appreciation scenarios, compare it honestly against a HELOC, a home equity loan, and a cash-out refinance, and read every disclosure — especially as the rules governing these products continue to change in 2026.
Ready to go deeper? Compare specific providers in our guide to the best home equity sharing companies of 2026, weigh the alternatives with cash-out refinance vs. HELOC and HELOC vs. home equity loan, or learn the basics of a cash-out refinance.
This guide is for general educational purposes and does not constitute financial, legal, or tax advice. Home equity agreements are complex contracts secured against your home; consult a licensed professional or a HUD-approved housing counselor before making a decision.
