Key Takeaways
- A home equity investment (HEI) has no stated interest rate or required monthly payment, but it is not cost-free. You pay upfront fees, and settlement is based on your home’s value or change in value.
- HEI costs can show up at three points: upfront fees deducted from your payout, any charges during the term, and the settlement payment.
- Because these costs aren’t collected as monthly payments, they’re easier to overlook, and the total cost is hard to know upfront.
- IRS publications on home mortgage interest and home sales do not specifically address HEIs. Consult a tax professional before you sign.
Home equity investments (HEIs) are often marketed around one benefit: no monthly payments. HEIs generally have no stated interest rate or required monthly payment, but they are not cost-free. Providers charge upfront fees that reduce your payout, and the settlement amount depends on your home’s value or change in value. Point currently lists a 4.9% processing fee with a $2,000 minimum; third-party closing costs also apply.
Taxes are less clear. IRS publications on home mortgage interest and home sales do not specifically address HEIs, so how proceeds, fees and settlement payments are treated can vary. A tax professional can tell you how the rules apply to your agreement.
In this article (Skip to...)
- How a home equity investment gets paid
- Where HEI fees typically show up
- Why HEI costs are harder to estimate than loan interest
- Tax treatment of HEIs in 2026
- The bottom line on HEI fees and tax implications
- Home equity investment fees and taxes: FAQ
How a home equity investment gets paid
Providers commonly market HEIs as investments. These agreements generally have no stated interest rate or required monthly payment to the provider. Instead, the provider gives you cash upfront in exchange for a share of your home’s future value. Rather than collecting interest over time, HEI providers are paid when the agreement settles.
Settlement usually happens when you sell the home, refinance or reach the end of the term, which the Consumer Financial Protection Bureau says is usually 10 to 30 years. Refinancing may help fund settlement, subject to lender and contract requirements. What you owe is calculated under the contract using your home’s value or change in value. Unlock, for example, multiplies the ending home value by the agreed Unlock percentage. Hometap calculates its share as the lower of its contractual percentage of the home’s value and its cap, calculated using an 18.5% annual rate compounded monthly on the investment amount, or a lower rate where state law requires. Additional settlement fees and amounts advanced on your behalf may also be due.
Where HEI fees typically show up
Most HEIs involve fees at multiple stages of the agreement. They’re not always labeled the same way across providers, but they tend to show up at three different points.
Check your home equity loan options. Start hereUpfront fees
Upfront fees are usually deducted from your proceeds before you receive the funds and may include:
- Application or origination fees: Charges for setting up and underwriting the agreement.
- Valuation fees: Costs associated with determining your home’s current market value, whether that’s through an appraisal or an automated valuation model.
- Administrative fees: Miscellaneous charges tied to processing and documentation.
The CFPB found that processing fees are often 3% to 5% of the initial payment. Here is what four major providers publish. Fees can change and may be limited by state law, and your disclosure shows the exact amounts. For more detail, see this guide to HEI origination fees.
| Provider | Published upfront fee | Also deducted from your payout |
|---|---|---|
| Point | 4.9% processing fee, $2,000 minimum | Third-party fees such as appraisal, title and credit report |
| Hometap | 4.5% of the investment amount, up to $20,000 | Appraisal and signing costs such as closing fee, title insurance and recording |
| Unlock | 4.9% origination fee | Third-party costs such as appraisal, title, escrow and recording |
| Splitero | 4.99% origination fee | Appraisal, escrow, title and recording fees of about $1,000 |
Because these fees come out of your payout, they reduce the cash you actually receive. A 4.9% fee on a $50,000 investment, for example, is $2,450 before third-party costs. Compare that net amount, not the headline investment, against a home equity loan or HELOC.
Fees during the holding period
HEIs generally have no required monthly payment to the provider during the term. Point says there are typically no service fees during the term, and Hometap says there are no other fees paid directly to Hometap beyond its processing fee.
You still pay your mortgage, property taxes, homeowners insurance and upkeep. If a provider pays a cost such as property taxes or insurance on your behalf, it can be added to what you owe; Hometap lists fees advanced on your behalf among the amounts due at settlement. Check any agreement for ongoing or advanced charges before you sign.
Fees and costs at settlement
Settlement is usually the largest cost. When you sell, refinance or reach the end of the term, you typically owe:
- The provider’s share, calculated under the contract using your home’s value or change in value.
- Any settlement or transaction fees in the agreement.
- Third-party costs to close out the agreement. Point, for example, lists reconveyance fees of $40 to $70, recording fees of $50 to $250 and a possible appraisal of up to $1,000.
If the home has appreciated significantly, the amount you owe can be far higher than the original cash received, even if no payments were made along the way. Refinancing may help fund settlement, subject to lender and contract requirements, but it has its own closing costs. See how refinancing out of an HEI agreement works.
Why HEI costs are harder to estimate than loan interest
HEI costs are harder to estimate because the provider’s return depends on your home’s future value. With a traditional loan, the interest rate, payment schedule and total interest are disclosed upfront. With an HEI, the total cost depends on factors no one can predict with certainty:
- How much the home appreciates or depreciates.
- How long the homeowner stays in the home.
- Market conditions at the time of sale or refinancing.
This is why HEIs don’t translate cleanly into APR comparisons. Two homeowners with identical agreements could end up paying very different amounts depending on timing and market performance.
Some providers cap what you can owe. Hometap caps its share using an 18.5% annual rate compounded monthly on the investment amount, or a lower rate where state law requires; additional settlement fees and amounts advanced on your behalf may also be due. Unlock says its Annualized Cost Limit sets a maximum return of 19.9% per year on its investment, or lower where state law requires. These caps limit the provider’s return under the agreement; they do not necessarily cap every expense or tell you your final settlement amount. This guide to the true cost of a home equity investment walks through examples.
Tax treatment of HEIs in 2026
IRS publications on home-related taxes, including Publication 936 on home mortgage interest and Publication 523 on selling your home, do not specifically address HEIs. People often compare HEIs to home equity loans or HELOCs, but those rules may not carry over, and treatment can depend on how the contract is structured. A tax professional can review your agreement.
Time to make a move? Let us find the right mortgage for youWhat IRS guidance does and does not cover
IRS Publications 936 and 523 do not address whether the cash you receive from an HEI is taxable when you receive it, or how a settlement payment is treated. Don’t assume HEI proceeds are tax-free, and ask a tax professional how the rules apply to your agreement.
If you sell your home, IRS Publication 523 explains how to figure your gain: subtract your adjusted basis from the amount realized. If you meet the ownership and use tests, generally owning and living in the home for at least two of the five years before the sale, you may be able to exclude up to $250,000 of gain, or up to $500,000 if you file jointly and meet the additional requirements. Publication 523 does not say how an HEI settlement paid from the sale affects that calculation, so ask a tax professional.
Can you deduct HEI costs?
Don’t assume you can. IRS Publication 936 says home mortgage interest is generally any interest you pay on a loan secured by your main home or a second home. HEIs have no stated interest rate, and Publication 936 does not specifically address them. Whether any HEI cost affects your taxes depends on the agreement and your situation, so consult a tax professional before you sign.
The bottom line on HEI fees and tax implications
An HEI can be a useful tool, but only if it fits the homeowner’s broader financial plan. The decision shouldn’t hinge solely on avoiding monthly payments. Before committing, homeowners should be able to clearly answer questions like:
- How does the provider earn its return if my home appreciates faster than expected?
- What happens if I need to sell or refinance earlier than planned?
- How much equity am I realistically giving up in different market scenarios?
Home equity investments have no stated interest rate or required monthly payment, but they are not cost-free. They defer costs to settlement and tie them to your home’s value, which is harder to predict. For some homeowners, that tradeoff makes sense. For others, it introduces uncertainty that outweighs the benefit of skipping monthly payments.
