Key Takeaways
- In most HEI agreements, the investor shares in overall home appreciation, including value created by renovations or ADUs you paid for.
- Whether improvement value is excluded depends entirely on contract language so ask about adjustment mechanisms and appraisal methods before signing.
- If you’re planning major improvements, it’s essential to negotiate protections up front rather than hope they’re considered at settlement.
If you’re considering a Home Equity Investment (HEI) to help build an Accessory Dwelling Unit (ADU) or renovate your home, one question probably looms large in your mind: “If I use HEI money to create new value in my home, does the investor get to share in that value too?”
The short answer for most HEI contracts is yes, the investor generally gets a portion of all home appreciation, including value that came from your improvements. That means even the value you helped create with an ADU or renovation can be included in their share at the end of the term.
But it’s not as simple as “they take everything you added.” It comes down to how the agreement is written, how equity share is defined, and whether the contract accounts for improvements or adjustments.
This article walks through how HEI investors share in home value, how renovations are typically treated in settlements, and what you should know before you sign, with concrete examples that make the impact clear.
- How HEI investors share in home value
- What HEI contracts typically say about improvements
- Example: Renovation and ADU value at settlement
- Why HEI providers claim value created by homeowners
- Where HEI contracts may (or may not) protect you
- What to ask before signing an HEI agreement
- What happens if you sell, refinance, or terminate early
- The bottom line
- Frequently asked questions
What it means to “refinance out” of an HEI
Most Home Equity Investment agreements work like this: You agree to share a percentage of your home’s appreciation with the HEI investor when the agreement ends.
“Appreciation” means the change in value from when the HEI investment started to when it ends.
This appreciation includes everything that increased the home’s market value, not just market trends.
In other words, if you spend money to improve the property and the value goes up, that increase usually counts toward the total appreciation that is shared, unless the contract says otherwise.
That’s why homeowners often wonder if they’re “giving away” their own improvements. The answer is rooted in how the investment share is defined.
What experts are saying
Michael Gifford, CEO of Splitero
“A home equity investment allows homeowners to access equity without monthly payments and without income or DTI requirements. We make an equity investment in the home today in exchange for a share of its future value — appreciation or depreciation.”
Verify your loan eligibility. Start here
What HEI contracts typically say about improvements
Every HEI provider has its own language, but most use terms like:
“Net appreciation includes all increases in the property’s fair market value, as determined by appraisal, from the initial valuation to the final valuation.”
There’s usually nothing in the basic definition of “appreciation” that excludes value created by renovations or additions.
Why? Because the investor is taking a share in the future value of the home overall — irrespective of where that value came from.
Under standard shared-appreciation language, all of those value increases are treated the same.
That’s also why many providers frame HEI as a bet on the total future value of the home, not just on market trends.
Example: Renovation and ADU value at settlement
Numbers help make this concrete.
Imagine:
- Your home value when the HEI starts: $500,000
- You sign a 25% shared appreciation deal
- You spend $80,000 of HEI money to build an ADU
- After some years, your home appraises at $700,000
Gross appreciation:
$700,000 − $500,000 = $200,000
Your investor’s share:
25% × $200,000 = $50,000
In this scenario, the investor receives $50,000. That share comes from both market appreciation and the value your ADU work added.
Even though you paid $80,000 to build the ADU, the investor still gets a share of the resulting $200,000 growth because most agreements count the full change in value.
If your contract has an adjustment mechanism, you may be able to challenge or adjust the portion attributable to improvements, but that depends on the exact language, which we’ll cover next.
Verify your HELOC eligibility. Start here
Why HEI providers claim value created by homeowners
For HEI providers, the logic is straightforward: the agreement is about sharing future value, not just passive market growth. They are taking on the risk that the home might not appreciate at all, or might even lose value, so they typically want a share of all upside.
From a homeowner’s perspective, this feels unfair: “I worked to create this value, shouldn’t it be mine?”
That tension is real, and it’s exactly why the contract language matters more than the headline APR or share percentage.
What you own is the home. What the investor owns is a contractual right to a percentage of future value.
Unless the contract specifically excludes certain improvements, that percentage generally applies across the board.
Where HEI contracts may (or may not) protect you
Some HEI agreements include language that allows for adjustments when a property has been significantly improved, or when improvements are financed separately.
For example:
- Some contracts require an appraisal after major renovations to establish the improved value baseline.
- Some contracts exclude certain types of improvements if they meet specific criteria.
- Other contracts allow disputes and independent appraisals to determine value changes attributable only to market forces.
These protections are rare, but they do exist, and they come down to negotiating the contract language before you sign.
If your HEI contract allows an “adjusted baseline valuation” after major improvements, you may be able to reduce the investor’s share of value that was clearly created by your own work but you need that language explicitly written in.
Without it, the standard shared-appreciation formula applies to all increases in the home’s market value.
Verify your borrowing eligibility. Start here
What to ask before signing an HEI agreement
Because the contract language determines how value from renovations is treated, here are important things to ask:
1. How is “appreciation” defined?
Does it include all improvements, or only market-driven changes?
2. Is there an “improvement carve-out” or an adjusted baseline?
If not, assume renovations count fully.
3. Will there be a pre- and post-improvement appraisal?
A second appraisal can be the difference between sharing all value and being able to argue some was created by your investment.
4. How are renovation costs documented and accounted for?
Not every contract has a clear method for this.
5. Is there a dispute process for disagreements on improvement value?
This can be vital if the appraisal numbers are contested.Getting clear answers before signing is far more powerful than discovering issues at settlement.
Time to make a move? Let us find the right mortgage for you
What happens if you sell, refinance, or terminate early
Whether you sell your home, refinance, or end the agreement early, most HEI contracts trigger the same shared appreciation calculation: final value minus initial value, multiplied by the investor share.
Because the investor’s share is tied to home value changes, your renovations generally factor into that calculation unless the contract says they shouldn’t.
If you refinance and buy out the investor, you’re usually paying the investor’s share of the appreciation up to that point — again, including any value added by renovations.
This is another reason to understand the contract language up front: you want to know what you’re responsible for paying back if you don’t keep the contract to full term.
The bottom line
When you use HEI money to build an ADU or renovate your home, most HEI contracts treat the entire increase in market value, including value you helped create with improvements, as part of the appreciation the investor shares in.
That’s why understanding contract language up front is critical: some agreements allow adjustment or appraisal-based carve-outs for improvements, but many do not.
FAQs
In most agreements, yes. Unless the contract explicitly exempts improvements, investors share in total appreciation, which includes value from renovations.
Sometimes. It depends on the provider and your leverage. Always ask about an adjusted valuation baseline or appraisal-based adjustment mechanism.
Most agreements use appraisals to determine final value. If improvements were made, their value is captured in that appraisal unless the contract says otherwise.
If total value declines, most agreements have no appreciation to share. You don’t pay the investor in that scenario, but you don’t get back your upfront investment either.
No. The investor’s share is only on appreciation — the increase over the initial value, not the original equity you owned.
