Are Home Equity Investments Loans? HEI Legislation, Regulation, and What the CFPB Say

If you’re a homeowner, your home’s value has probably increased over the past few years. That means you have an asset you can use if you need cash for other financial goals.

You may have heard of a home equity loan or line of credit (HELOC) to borrow from your home equity, but there’s also a newer home equity product called a home equity investment (HEI) that’s been gaining popularity. It allows you to receive a lump sum of cash in exchange for a share in your home’s future value, without making monthly payments.

So, are home equity investments loans? That’s come into question over the past few months. As HEIs have gotten more popular, regulators have started to notice. Several recent court cases are closely examining HEI marketing language and deciding if HEI should be considered loans or something entirely different. Here’s everything you need to know about it.

Table of Contents

1. What is an HEI, or HEA?
   1. Who HEIs are best for
2. Are home equity investments considered loans?
   1. Why some courts say HEIs are loans
   2. Why some courts say HEIs aren’t loans
   3. Future terms
3. What consumers need to know about HEIs
   1. Benefits
   2. Risks
4. The future of HEIs
   1. How to apply

What is an HEI, or HEA?

According to Federal Reserve Data, consumers currently have $35 trillion in home equity. HEIs enable consumers to tap into that equity by selling a portion of their home’s future value. HEIs are attractive to homeowners because, unlike home equity loans or HELOCs, HEIs have more flexible terms.

Additionally, repayment to the HEI company is a one-time, rather than monthly, event. At the end of your term, you sell your house, refinance it, or buy back your equity from the company. According to the Consumer Financial Protection Bureau, (CFPB), this type of home equity contract is typically presented as an alternative to more commonly known home equity products.

Currently, there are several HEI companies offering agreements that last from 10 to 30 years. The amount of cash homeowners can take out depends on a few factors, like how much the home is worth, how much equity the homeowners have, and the HEI company’s risk tolerance. Homeowners should do their research and prequalify at more than one HEI company.

Who HEIs are best for

HEIs are not ideal for all homeowners because of the fees involved, but they can be helpful for homeowners who fall into a few categories:

• Homeowners who don’t want monthly payments but aren’t old enough to qualify for a reverse mortgage.
• People who have less-than-ideal credit or a past bankruptcy and don’t qualify for a home equity loan or HELOC.
• People who need to fund a large expense, like medical costs, home improvements, or consolidating high-interest debt.
• People who understand the costs and fees associated with HEIs but believe the pros outweigh the cons.
• Homeowners who don’t want to refinance to a higher interest rate but still want to tap into their home equity.

Are home equity investments considered loans?

Because home equity investments are a relatively new financial product, they don’t fit neatly into a specific category. For example, some courts and regulatory agencies consider home equity investments loans, while others do not. As of right now, the category will depend on the state you live in.

Recently, new legislation has taken a closer look at HEI marketing language, too, and some courts have ruled that some of the language companies used to market the product was deceptive. Here are a few reasons why some courts say HEI should be considered loans and why some say they shouldn’t be.

Why some courts say HEIs are loans

• Homeowners receive a lump sum of money with the obligation to pay it back.
• HEIs put liens on the property, similar to other home equity products.
• Repayment is a requirement, even if the amount fluctuates.
• HEI companies earn revenue when customers pay back what they borrowed.

Why some courts say HEIs aren’t loans

• HEI companies do not charge interest on the amount homeowners take out.
• Homeowners do not have to make monthly payments.
• HEI companies and homeowners both share in the gains and losses.
• Homeowners sell a portion of their home’s future value, which HEI companies argue is different from borrowing against equity.

Future terms

In the future, HEIs might be considered a new financial category. Until then, courts in each state will decide how to categorize them. For example, one 2025 court case ruled that home equity investments should be considered a reverse mortgage because homeowners don’t repay the HEI company until a triggering event.

As more homeowners learn about home equity investments and the product gains popularity, HEI companies will likely face more regulations and requirements in the future.

What consumers need to know about HEIs

Here’s a summary of a few benefits and drawbacks that homeowners should know about home equity investments.

Benefits of HEIs

• Homeowners do not have to make monthly payments.
• Homeowners can stay in their homes.
• If home values decline, the HEI company shares in the loss.
• HEI companies have more flexible qualifications than other home equity products.
• Homeowners get a lump sum they can use for many different purposes.
• Homeowners don’t have to refinance to a higher interest rate.

Risks of HEIs

There are also a few drawbacks homeowners need to know.

• The CFPB explains that HEIs can be expensive compared to other equity products.
• HEI contracts can be difficult to understand.
• If consumers are unable to buy back their equity, they may have to sell their homes.
• HEI companies might not take an equal share in losses.

The future of HEIs and how to apply 

The CFPB says home equity investments are still a niche product, especially compared to other home equity products like HELOCs. However, the HEI market will likely grow in the future as homeowners learn about the product and seek out other ways to leverage home equity.

Based on recent court cases, it’s likely that HEI companies will need to adjust their marketing language and provide more disclosures about the product. This will vary by state and whether or not new court cases arise and change the law.

How to apply for an HEI

If you understand the risks and benefits of this product and you’re interested in applying for an HEI, here are the steps to take.

• Prequalify: You can prequalify for an HEI in just a few minutes. Visit an HEI company’s website, put in your address, and answer a few questions. Most HEI providers can determine whether or not you are eligible for one in just a few minutes.
• Apply: After prequalifying with two to three different HEI providers, choose one that offers terms that are the best fit for your personal situation. Then, fill out a full application. Check out our top picks for the best HEI companies. Hometap is the highest rated provider according to our research.
• Get a home appraisal: After applying, your HEI company will schedule a home appraisal. This is an important part of the process that helps determine how much equity you have in your home.
• Review your offer: Once your home appraisal is complete, the HEI company will send you an offer. Read the fine print, including information about potential fees, repayment multipliers, and more. If you have questions about the contract, ask before signing.
• Sign the agreement: Once you fully understand and accept everything in your HEI contract, sign.
• Get funds: After you sign your HEI contract, the company will disburse your funds, typically within a few days to two weeks.