Key Takeaways
- If you need immediate monthly relief, a $0-payment HEA can reduce cash-flow strain faster than a HELOC, because you receive funds without adding a new payment.
- If you can manage a new monthly payment, a HELOC is typically less expensive over time and allows you to retain more of your future home value.
- Your best option depends on your current cash flow, ability to qualify, and how long you’ll stay in your home.
When debt becomes unmanageable, the main concern is often reducing monthly obligations as quickly as possible. A HELOC can unlock home equity at a lower overall cost, but it creates a new required monthly payment on top of your existing bills. A home equity agreement provides cash with no required monthly payments, which can ease pressure right away, but it does so by giving the provider a share of your home’s future value.
This guide compares HELOCs and home equity agreements based on how each affects short-term cash flow and the costs of that relief over time.
In this article (Skip to...)
- What fast relief means
- What is a HELOC?
- What is an HEA?
- How to choose
- Video: HELOC vs HEA explained
- Cost comparison
- Which is easier
- Alternatives to home equity
- FAQs
What does “fast relief” mean?
When debt is overwhelming, relief typically means one or both of the following:
- Lowering monthly payments immediately so you can stay current and avoid late fees, collections, or missed housing payments.
- Getting enough cash quickly to pay off high-interest balances and stop the situation from getting worse.
A HELOC can help with the second goal, but it often makes the first goal more difficult at the outset by adding a new payment. A $0-payment HEA helps with the first goal immediately, but may cost more later. Before comparing options, consider one critical question: can you safely manage a new monthly payment at this time?
Check your home equity options. Start here
What is a HELOC?
A home equity line of credit (HELOC) is a revolving credit line secured by your home. You can borrow as needed during a draw period, typically 5 to 10 years, and usually pay interest only on the amount used. After the draw period, the loan enters repayment, usually lasting 10 to 20 years, with payments increasing as you repay both principal and interest. Most HELOCs have variable rates tied to the prime rate, so payments may rise over time.
What is a home equity agreement (HEA / HEI)?
A home equity agreement, sometimes called a home equity investment, provides a lump sum in exchange for a share of your home’s future value. You do not make monthly payments or pay interest; you repay the agreement when you sell the home, refinance, or reach the end of the term. The repayment amount depends on your home’s value at that time, which can be costly if the home appreciates significantly.
How to choose between a HELOC and HEA
When debt feels overwhelming, monthly cash flow often matters more than total cost over time. If your top priority is lowering monthly obligations immediately, a $0-payment HEA usually delivers faster relief. If your priority is keeping long-term costs lower and you can manage an added payment, a HELOC often makes more sense.
Compare HELOCs with multiple lenders. Start here
Video: HELOC vs HEA explained
When a HELOC makes more sense
A HELOC works better when you can manage an added payment and want a lower-cost way to use your equity. In those cases, the interest-based structure and retained home value often outweigh the impact of a new monthly obligation.
A HELOC may be the better option than an HEA if:
- Your budget can absorb the payment, even if rates increase.
- You have a stable income and a qualifying credit history.
- You want revolving access to funds over time.
- Keeping as much future home value as possible matters to you
When an HEA makes more sense
A home equity agreement is appropriate when adding a new monthly payment would strain your budget or increase the risk of missed payments. Because repayment happens later, it can provide short-term stability when cash flow is already tight.
A HEA may be the better option than a HELOC if:
- You cannot safely take on another required monthly payment.
- Your income, credit, or DTI make HELOC approval difficult.
- You need cash quickly to stabilize your finances.
- You accept trading future home value for near-term flexibility.
Cost comparison between HELOCs and HEAs
When comparing costs, timing is important. HELOCs generally cost less over time, while HEAs defer costs to the future.
Find your lowest HELOC rate. Start hereHELOC costs
- Transparent interest rates and fees
- Monthly payments begin immediately.
- Costs increase if interest rates rise.
HEA costs
- No monthly payments
- The total cost depends on your home’s future value.
- It can be expensive in strong housing markets.
If you expect significant appreciation or plan to stay in your home long-term, a HELOC often preserves more wealth. If your immediate concern is financial stability, a HEA may offer greater short-term security.
Which option is easier to qualify for: a HELOC or an HEA?
For borrowers under financial strain, eligibility often determines which option is even available.
Explore HELOC lenders. Start hereHELOC qualification standards
A HELOC works like a traditional loan, so lenders focus on your ability to repay it on a monthly basis, both today and if rates increase. HELOC approval depends on income, existing debt, and credit score.
Most HELOC lenders look for:
- A credit score of at least 620, with stronger terms closer to 700
- A debt-to-income ratio typically below 43%
- Verifiable income that supports the new payment
- Sufficient home equity, with a combined loan-to-value usually capped at around 80% to 90%
Borrowers who already feel stretched often struggle to meet these requirements.
HEA qualification standards
Home equity agreements follow a different underwriting model. Providers place less weight on monthly affordability and focus more on the property and long-term value.
HEA providers typically review:
- Current home value and available equity
- Property type, condition, and location
- Credit history, often with more flexible score thresholds
- Income documentation that is limited or not required
Because HEAs are not repaid until you sell the home, refinance, or reach the end of the agreement term, they are often easier to qualify for when income or DTI is already tight.
Alternatives that may provide relief without using home equity
Before committing to any option that uses your home as collateral, consider whether mortgage relief is available through other means. In some cases, non-equity options can reduce financial pressure more quickly and with lower long-term risk.
Explore your home equity options. Start hereDepending on your situation, alternatives may include:
- Creditor hardship or settlement programs
- Credit counseling and payment plans
- Personal loans (higher rates, but unsecured)
- Mortgage forbearance or modification
Decide which option fits your situation
If debt feels unmanageable, the next step is weighing how each option affects your monthly obligations and your future home value. Looking closely at your cash flow, credit, and equity can help you decide whether you can afford a HELOC payment or whether a home equity agreement is a more realistic option right now.
Use the resources below to compare both paths, then speak with a qualified lender or provider to confirm what you may qualify for before making a decision that’s hard to undo.
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FAQs about HELOCs and home equity agreements
Yes, a home equity agreement (HEA) and a home equity investment (HEI) refer to the same structure. Both provide a lump sum in exchange for a contractual share of your home’s future value, with repayment due when you sell, refinance, or reach the end of the agreement term.
Some borrowers prioritize eliminating monthly obligations over minimizing long-term cost. An HEA does not require monthly repayment, which can stabilize cash flow when income is strained or debt payments are already unmanageable, even though the eventual payout may be higher.
No, once you draw funds from a HELOC, interest accrues immediately and must be paid monthly. Even during an interest-only draw period, payments are required and increase your total monthly obligations.
That depends on whether you can reliably take on another required payment. If adding a HELOC payment increases the risk of missed bills or default, it may worsen your situation. An HEA avoids new monthly payments, which can reduce immediate pressure, but it still creates a future obligation tied to your home’s value.
