Home Equity Investment: How HEIs Work, Costs, and Who They Fit

What a home equity investment is

A home equity investment (HEI), also called a home equity sharing agreement or home equity agreement, is a contract that pays you a lump sum today in exchange for a share of your home’s value at a future settlement date. You keep title and live in the home. You make no monthly payment to the HEI provider. Your mortgage payments, property taxes, insurance, and maintenance costs continue. When you sell the home, refinance in a way that requires settlement, buy the investor out, or reach the end of the contract term, you owe the investor a payoff that is calculated from your home’s value at that time.

The CFPB’s January 2025 market report described a growing market with nonstandard disclosures and varying payoff formulas. Its separate court brief argued that one HEI product was a residential mortgage loan under the Truth in Lending Act. The bureau withdrew that brief in February 2025, pending further consideration. Do not assume the product label determines your legal protections. Washington’s regulator also reported similarities to traditional loans in September 2024.

Several companies offer HEIs in the U.S. market. Terms vary by provider and by state, so the specifics below describe common structures, not any single company’s product.

How the investor’s share is calculated

Home equity investment contracts use different payoff formulas. Two mechanics to look for are:

A share of the ending home value. The investor is paid a fixed percentage of what the home is worth on the settlement date. The CFPB’s 2025 issue spotlight gives an illustration in which a 10% advance comes with a 20% share, so the investor collects roughly double the advance before any appreciation.

A discounted (risk-adjusted) starting value. Some providers set the “starting value” used in the payoff formula below your home’s appraised value. This protects the investor: you can owe a share of a calculated gain even if the home’s market value has not risen. In a hypothetical example, if the appraisal is $500,000 and the contract uses a 15% discount, the starting value on the contract is $425,000. Any gain over $425,000, not $500,000, counts as appreciation that the investor shares in.

Some contracts combine the two: a discounted starting value, plus a share of appreciation above that value, plus a return cap (see below). Others pay a flat percentage of the ending home value with no appreciation formula.

Return caps. A cap can limit the settlement amount even when the formula produces a higher payoff. Compounding matters. The CFPB reported that, as of 2024, several companies used caps of about 18% to 20%, compounded monthly. Those are equivalent to roughly 19.6% to 21.9% effective annual growth. Ask for the cap formula and the dollar payoff at your planned exit date.

Home equity investment term, buyout, and settlement

Terms run from about 10 years to 30 years depending on the provider. The contract ends on the earliest of these events:

• You sell the home.
• You refinance in a way that requires paying off the HEI lien.
• You buy out the investor’s share.
• The term expires.

Early buyout rules vary. For example, one provider advertises buyouts at any time without a prepayment penalty during its 30-year term. Other contracts restrict early settlement. Even without a penalty, the payoff formula can make an early exit expensive. If you reach the end of the term and have not sold, refinanced, or bought the investor out, the contract typically requires you to pay the settlement amount from other funds or sell the home.

Home equity investment fees and closing costs

A home equity investment has upfront costs as well as a settlement payment. Provider disclosures reviewed October 26, 2026, give these examples:

• One provider charges a processing fee of 4.5% of the investment, capped at $20,000. Another discloses up to 4.9%, with a $2,000 minimum. These are provider examples, not an industry-wide quote.
• The first provider estimates $500 to $1,000 for a traditional appraisal, or $60 to $299 for an eligible virtual valuation.
• Title insurance, escrow, recording, and attorney or notary charges can also apply. Get an itemized estimate for your property.

Fees are generally deducted from the cash advance. In a hypothetical closing, a $100,000 gross advance with a 4% origination fee and $1,500 in third-party costs puts $94,500 in your pocket. This calculation covers HEI closing costs only.

Credit, equity, and property requirements

Requirements differ by provider. These consumer-facing examples were checked October 26, 2026; meeting a minimum does not guarantee approval.

• Credit score. One provider publishes a 500 minimum; another requires a minimum FICO score of 575. Both still review eligibility.
• Equity. Distinguish equity before the investment from equity retained afterward. One provider requires at least 25% equity before the investment. Another says homeowners usually must retain 29% or more afterward. In a hypothetical example, a $400,000 mortgage against a $700,000 home leaves $300,000 of equity, about 43%, before any HEI. That alone does not establish the available advance.
• Property type. Eligibility can include single-family homes, condos, and certain rental properties. One provider accepts manufactured homes; another excludes them and co-ops. Ask about your property’s ownership and occupancy rather than assuming it qualifies.
• Occupancy and income. One provider’s FAQ states that it has no employment, income, or debt-to-income requirements. That does not remove its other underwriting conditions.
• State availability. Check the provider’s current list and your address. For example, one provider’s FAQ lists 26 states: Alabama, Arizona, California, Delaware, Florida, Georgia, Idaho, Indiana, Kentucky, Michigan, Missouri, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Virginia, and Wisconsin. This is one company’s footprint, not a list for the whole HEI market.

What happens if the home loses value

A lower home value can reduce the payoff without reducing it below the original advance. A discounted starting value or a multiplier can absorb much of the decline before the investor loses money. Under the hypothetical 10%-advance/20%-ending-value formula above, a home must lose more than half its value before the investor receives less than the gross advance, ignoring fees and caps.

You remain responsible for maintaining the property and paying the mortgage, property taxes, and insurance. The CFPB report identifies failures to pay taxes, insurance, or a senior mortgage as possible early repayment triggers. Read the default and acceleration terms before signing, including restrictions on additional liens. Failure to settle can put the home at risk of foreclosure.

The lien and what it means for a later refinance or HELOC

HEI providers secure their agreements with a lien against the property. The position depends on existing liens and provider rules. That lien has two practical effects:

• It can limit later borrowing. Ask a prospective lender how it will treat the HEI obligation and available equity. The settlement amount can grow as the home’s value rises.
• It can complicate a refinance. Ask whether the provider will subordinate its lien, meaning let the new mortgage retain priority, and whether the new lender accepts that arrangement. If either party requires settlement, obtain a current payoff quote. Do not assume a refinance will be available to fund it.

If you expect to refinance within a few years, model what the HEI payoff would be at that point and whether a cash-out refinance would still make sense after settling it.

A worked hypothetical: two appreciation scenarios

Assumptions, stated so you can recompute them:

• Home value today: $500,000
• Existing mortgage: $200,000 (40% LTV, so 60% equity)
• HEI cash advance: $50,000 (10% of current value)
• Origination fee: 4% of advance ($2,000), plus $1,500 in third-party costs, deducted from the advance. Net cash to homeowner: $46,500
• Investor’s share at settlement: 20% of the home’s value on the settlement date (no separate return cap applied in this example)
• Term: 10 years, settled at the end by sale
• No interim HEI payments. The calculations exclude mortgage payments, property taxes, insurance, maintenance, and selling costs. They measure the HEI alone; home-price growth is assumed, not forecast.

Scenario A: 4% annual home-price growth

• Ending home value: $500,000 x 1.04^10, about $740,122
• Investor payoff: 20% x $740,122, about $148,024
• Homeowner’s HEI cost over 10 years: $148,024 payoff minus $46,500 net cash received, about $101,524, including the $3,500 withheld at closing
• Annualized payoff growth relative to the $50,000 gross advance: about 11.5%. Relative to the homeowner’s $46,500 net proceeds, the annualized cost is about 12.3%

Scenario B: 1% annual home-price growth

• Ending home value: $500,000 x 1.01^10, about $552,311
• Investor payoff: 20% x $552,311, about $110,462
• Homeowner’s HEI cost over 10 years: $110,462 payoff minus $46,500 net cash received, about $63,962, including closing costs
• Annualized payoff growth relative to the gross advance: about 8.2%. Relative to net proceeds, the annualized cost is about 9.0%

The dollar cost is sensitive to appreciation. A home that gains 4% a year for a decade costs the homeowner roughly $37,562 more than one that gains 1%, with no change in the contract terms. These annualized figures describe the assumed cash flows, not a quoted loan APR or the provider’s actual investment return after its expenses.

Numbers would shift if the contract used a discounted starting value, a return cap, or a loss-sharing floor. Ask any provider for a payoff estimate at several appreciation rates, including zero and negative, before signing.

Who an HEI fits, and who it does not

An HEI tends to make sense for a specific profile:

• A homeowner with substantial equity who wants a lump sum now.
• Cash flow that cannot absorb an additional monthly payment, or income that is hard to document.
• A credit profile that meets the HEI provider’s requirements.
• A realistic settlement plan, such as a planned sale within the term. Avoid relying on an uncertain inheritance or future financing.
• A budget that can cover the settlement under several home-value scenarios, including rapid appreciation.

An HEI is a poor fit if you cannot identify a way to fund the settlement while keeping the home. Rapid appreciation can also make the agreement costly, subject to its cap.

A short comparison with other equity options

A HEI postpones payment until settlement; a HELOC or home equity loan generally requires monthly payments. Compare written offers using the same net cash received and exit date, including upfront fees and the final balance. The lower-cost choice depends on the offers and future home values, not the absence of a monthly payment.

Compare the mechanics in these guides: HELOC requirements, home equity loan rates and requirements, and cash-out refinance vs HELOC. Older homeowners can also review ways seniors can tap home equity.

Before you sign

Ask the provider for a written payoff estimate at 0%, 2%, 4%, and 6% annual appreciation over the full term. Confirm whether the contract uses a discounted starting value, a return cap, a loss-sharing floor, and a multiplier on the advance. Read the default section and the maintenance, insurance, and tax requirements. Include a falling-value scenario and an early exit. Ask how the final appraisal is chosen, how you can dispute it, and whether documented renovations receive an adjustment.

If an HEI still looks like the right tool after that comparison, get quotes from more than one provider. The share percentage, the starting-value discount, and the fees all move, and small changes can materially affect the settlement amount.