Home Equity Investment Loan | Pros & Cons 2025

September 11, 2025 - 3 min read

Key Takeaways

  • HEIs provide upfront cash without monthly payments or new debt but you give up a share of your home’s future appreciation.
  • 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.
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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.

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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:

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

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HEI ProsHEI Cons
No monthly payments: No loan balance or interest charges.Give up appreciation: You owe a share of your home’s future value.
Flexible qualification: Easier requirements than loans, often for lower credit or variable income.Uncertain cost: Final payout depends on future home value.
No foreclosure risk: No monthly payments means no default risk.Lump sum due: Must repay at term end, which may require selling or refinancing.
Shared downside: If home value falls, the investor shares in the loss.Complex terms: Agreements can be difficult; legal review recommended.
Lump sum of cash: Receive a large upfront payment for any use.Upfront fees: May include closing, appraisal, or admin costs.

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

FeatureHome Equity Investment (HEI)Home Equity Loan (HEL)Home Equity Line of Credit (HELOC)
What it isSells a share of your home’s future value. It is not a loan.A second mortgage that provides a lump sum.A revolving line of credit.
Monthly PaymentsYou pay back the investor when you sell or after a set term.Fixed monthly payments over a set term.Payments can fluctuate. You pay only on what you borrow.
InterestThe investor’s return is a share of your home’s appreciation.Fixed interest rate.Variable interest rate.
Credit ScoreMore lenient; can be an option for those with lower scores (some companies accept as low as 500).Requires good credit, typically 620+.Requires good credit, typically 620+.
RiskYou share the home’s appreciation and depreciation. You could pay back more or less than you received.Fixed, predictable payments. Risk of foreclosure if you default.Payments can change with the market. Risk of foreclosure if you default.
Best ForHomeowners with low credit or unsteady income who need cash and want to avoid monthly payments.Homeowners who need a specific, large amount of cash for a single, large expense.Homeowners who need flexible access to cash over a long period.

FAQ

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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.

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.

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.

Absolutely. You keep living in your home. It’s not like selling or refinancing. You’re just partnering with an investor behind the scenes.

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.

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.

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
Authored By: Erik J. Martin
The Mortgage Reports contributor
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 Kadzielawski
Updated By: Aleksandra Kadzielawski
The Mortgage Reports Editor
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.