What's the difference between a home equity agreement and a HELOC? A HELOC is a loan: you borrow against your equity and pay interest monthly. A home equity agreement (also called a home equity investment, or HEI) gives you cash now in exchange for a single repayment later tied to your home's value. The Consumer Financial Protection Bureau found that repayment amount often grows 19.5% to 22% per year in the early years.
The short answer: a home equity agreement can work for an owner who can't qualify for or carry a monthly payment. For most owners who can, a HELOC or cash-out refinance tends to cost less. Here's how to compare them honestly.
Data note: All figures are from the CFPB's Issue Spotlight "Home Equity Contracts: Market Overview" (Jan. 15, 2025). Read November 11, 2026. Contract terms vary by company; your agreement controls.
How a Home Equity Agreement Works
- You receive: an upfront lump sum from a company
- You give: a share of your home's future value, secured by a lien
- Monthly payments: typically none
- Repayment: one lump sum at the end of the term, usually 10 to 30 years, or at a trigger like a sale
- You still pay: property taxes, insurance, maintenance and all selling costs
- Who uses them: the CFPB found the median customer was in their 50s, and roughly 90% or more had a mortgage ahead of the contract
The names vary. CFPB notes these are marketed as home equity investments, home equity agreements or shared equity agreements.
What It Really Costs: The CFPB Examples
Three years in
On a $50,000 upfront payment, one company's calculator showed a repayment of $68,045 (if the home lost an average 1% a year) to $71,538 (if it appreciated by any amount) after three years.
Ten years: contract vs. HELOC
CFPB compared the same $50,000 as a home equity contract and as a HELOC at 9%, interest-only for 10 years:
Home equity contract:
- Monthly payment, years 1-10: $0
- Owed at year 10: $94,074 to $215,892, depending on home prices
- Total paid over 10 years: $94,074 to $215,892
HELOC:
- Monthly payment, years 1-10: $375 in interest
- Owed at year 10: the original $50,000
- Total paid over 10 years: $95,000
The CFPB's takeaway: the contract was more expensive if the home appreciated, and cheaper only if the home's value fell at least 5% over 10 years. That comparison also excludes origination fees, which CFPB says are typically much higher for home equity contracts; two companies it cited charged 3% and 4.9% at closing.
Pros and Cons
Potential advantages
- No monthly payment
- Available to some homeowners with low credit scores or no income, per CFPB's review of marketing
- Cash for debt consolidation or home improvements, the two most common uses CFPB found
Risks the CFPB flagged
- Unpredictable repayment that can run into the hundreds of thousands
- Non-standardized disclosures, making comparison hard
- Refinancing friction with the contract's lien in place
- Appraisal disputes, at the start or at settlement
- Forced sale risk: owners who can't pay at the end may need to sell or face foreclosure
In CFPB's review of 38 consumer complaints, 6 of 21 published narratives called the products "predatory."
How a HELOC Compares
- Structure: a revolving line of credit secured by your home
- Payments: monthly; often interest-only during the draw period
- Cost: interest on what you draw, plus closing costs
- Approval: CFPB notes HELOCs often have stricter underwriting
- Scale: about 1.2 million HELOCs were originated in the four quarters ending mid-2024, versus about 11,000 home equity contracts securitized by the four largest companies in the first 10 months of 2024
For more on borrowing against equity, see HELOC vs. cash-out refinance.
Questions to Ask Before You Sign
- What's the maximum I could owe, and is there a cap?
- How is the starting home value set, and is it discounted?
- What fees are due at closing?
- What happens at the end of the term if I can't pay?
- Will this make it harder to refinance my mortgage?
- Have I compared a HELOC, a cash-out refinance, a reverse mortgage or selling and renting?
“Any lien on your home comes due at the closing table, and a home equity agreement is no exception. If you're considering one, get the worst-case repayment in writing and compare it with every other option, including selling on your own timeline. Sometimes the best financial move is the one that keeps you in control of the sale.”
— Elizabeth Vijan, Tackett Team, eXp Realty
Frequently Asked Questions
What is a home equity agreement and how does it work?
Cash now in exchange for a share of your home's value later, repaid in one lump sum at the end of the term or when you sell.
Is a home equity agreement better than a HELOC?
Rarely on cost. In CFPB's example, it was cheaper only if the home lost at least 5% of its value.
What are the pros and cons of a home equity agreement?
No monthly payment and looser approval, versus high, unpredictable costs and possible forced sale.
Does a home equity agreement affect selling my house?
Yes. It's typically settled from your proceeds at closing.
Weighing Your Equity Options?
If selling might be part of the answer, I'll show you what your home could net today so you can compare it side by side with any financing offer.
Elizabeth Vijan | Tackett Team, eXp Realty
Phoenix & Scottsdale Real Estate
Request a Home Valuation ยท Call or text 602-885-7752
Sources: CFPB: Issue Spotlight, Home Equity Contracts: Market Overview (Jan. 15, 2025)
Disclaimer: Not financial, tax or legal advice. Talk with a licensed lender and your financial advisor before tapping home equity. Information deemed reliable but not guaranteed. Equal Housing Opportunity.
Tackett Team, eXp Realty · Get in touch