Home Equity Agreement

Home equity agreements sit outside the traditional mortgage lending framework. Unlike a home equity loan or HELOC from a direct lender, an HEA does not create a monthly payment obligation or add to the borrower's debt-to-income ratio. The investor (companies like Hometap, Point, and Unison) receives a percentage of the home's value at settlement — typically 15%–35% of the appreciated value — in exchange for the upfront cash. On a $100,000 HEA with a 20% equity share, if your $500,000 home grows to $700,000, you owe the investor $40,000 (20% of the $200,000 gain) plus return of the original investment.

HEAs are not regulated as mortgages in most states, which means they fall outside the TRID disclosure framework that governs direct lender products. There is no APR calculation, no Loan Estimate, and no Closing Disclosure — borrowers must evaluate the effective cost of capital differently than they would a direct lender mortgage. The Consumer Financial Protection Bureau has flagged HEAs for consumer education given the complexity of evaluating their total cost.

HEAs may make sense for homeowners who are equity-rich but cash-poor, cannot qualify for a home equity loan or HELOC from a direct lender, or want to avoid adding monthly debt service. They are not appropriate for borrowers who expect large home appreciation, plan to stay in their home long-term, or can qualify for conventional direct lender home equity products at competitive rates. Always compare the total cost of an HEA to a home equity loan or cash-out refinance from a direct lender before proceeding.