Alternatives to Home Equity Loans or HELOCs

Tapping home equity isn’t always as simple as applying for a loan. Many homeowners discover that credit score requirements, high debt-to-income ratios, inconsistent income, or strict underwriting rules can make traditional home equity loans and home equity lines of credit (HELOCs) difficult to qualify for.

Others may decide that monthly payments, interest rates, or long approval timelines don’t fit their financial situation.

Fortunately, those roadblocks don’t mean you’re out of options. Alternative ways to get equity out of your home exist, and some offer greater flexibility, faster access to funds, or looser credit requirements. Here’s what to know about your options.

Table of Contents

1. 4 alternative ways to get equity out of your home
   1. 1. Home equity agreement (HEA)
      1. Who qualifies for a home equity agreement?
      2. When to consider a home equity agreement
   2. 2. Reverse mortgage
      1. Who qualifies for a reverse mortgage?
      2. When a reverse mortgage makes sense
   3. 3. Sale-leaseback agreement
      1. Who qualifies for a sale-leaseback?
      2. When a sale-leaseback makes sense
   4. 4. Cash-out refinance loan
      1. Who qualifies for a cash-out refinance loan?
      2. When a cash-out refinance makes sense
2. Non-equity alternatives to consider
3. FAQs
   1. What is the easiest home equity loan or HELOC alternative to get?
   2. Are home equity alternatives safe?
   3. What is the cheapest way to borrow against home equity?

4 alternative ways to get equity out of your home

1. Home equity agreement (HEA)

A home equity agreement lets you receive a lump sum of cash in exchange for a percentage of your home’s future value. With an HEA, you’re not borrowing money that needs to be repaid with interest. Instead, you’re selling a share of your home’s future appreciation (or depreciation) to an investment company.

Who qualifies for a home equity agreement?

Credit score requirements are much less stringent than traditional home equity loans or HELOCs, with some HEA providers accepting credit scores as low as 500.

You’ll typically need 20% equity in your home to meet the loan-to-value (LTV) ratio requirements. Some HEA providers focus on primary residences, though some—including Point—also work with investment properties, albeit with stricter criteria.

Pros

• No monthly payment burden

  Because HEAs don’t require monthly installments, they can free up your budget and reduce financial strain compared to traditional loans.

• Easier to qualify with bad credit

  HEA providers typically use more flexible credit standards than mortgage lenders, making them accessible to homeowners with lower credit scores.

Cons

• Lose portion of future appreciation

  In exchange for upfront cash, you commit to sharing future home value gains with the company, which can cost far more than interest on a loan if your home rises in value significantly.

• Lien on property complicates refinancing

  HEAs place a lien on your home, and that claim must be addressed before refinancing or selling, potentially slowing the process or limiting your options.

• Terms can be complex

  HEA contracts often include detailed formulas, timelines, and conditions that are harder to understand than a traditional loan, making it important to read and compare agreements carefully.

When to consider a home equity agreement

HEAs work best for homeowners with credit scores below 620 who don’t qualify for traditional products. They’re also a good fit if you can’t afford monthly payments but have a stable housing situation.

That said, avoid HEAs if you’re planning to stay long-term in a home likely to appreciate significantly, or if you need to refinance soon.

2. Reverse mortgage

A reverse mortgage—specifically a Home Equity Conversion Mortgage (HECM)—lets you convert home equity into cash without monthly mortgage payments. The loan becomes due when you move, sell the home, or pass away.

You can receive funds as a lump sum, monthly payments, a line of credit, or a combination of those options.

Who qualifies for a reverse mortgage?

You must be 62 or older to qualify for a HECM. You’ll also need substantial equity in your home and must remain current on property taxes, insurance, and home maintenance throughout the loan term.

Pros

• No monthly mortgage payments

  A reverse mortgage lets you access home equity without adding a monthly mortgage payment, which frees up cash flow for everyday expenses.

• Stay in home

  Borrowers can remain in their homes as long as they meet program requirements.

• Various payout options

  You can receive funds as a lump sum, monthly payments, a line of credit, or a combination, giving you flexibility based on your financial needs.

Cons

• Age requirement

  Reverse mortgages are limited to homeowners age 62 or older, which excludes younger borrowers who may need equity access.

• High upfront costs and fees

  Closing costs, mortgage insurance premiums, and servicing fees can make reverse mortgages more expensive than other equity-based products.

• Reduces inheritance for heirs

  Because the loan balance grows over time, a reverse mortgage can significantly reduce the equity left to beneficiaries.

When a reverse mortgage makes sense

Reverse mortgages work best for seniors 62 and older needing retirement income or a lump sum for major expenses. They’re a good fit if you plan to stay in your home long-term and can maintain the property.

However, you should consider alternatives if you want to leave your home to heirs or might need to move within five to 10 years.

3. Sale-leaseback agreement

A sale-leaseback agreement is a transaction where a homeowner sells their property to a company or investor and then immediately leases it back as a renter. This allows the homeowner to unlock the equity in their home without having to move out.

Instead of taking on a loan or monthly debt payments, they receive a lump sum from the sale and continue living in the home under a lease.

Who qualifies for a sale-leaseback?

Most people who qualify for a sale-leaseback simply need to own a home with substantial equity and have the ability to maintain rental payments. Since it’s not a loan, credit scores and employment history typically matter less than in traditional lending. However, programs may have restrictions on property type or condition.

Pros

• Access full equity quickly

  A sale-leaseback allows you to unlock a large portion of your home’s equity in a single transaction, often faster than traditional lending options.

• No income/credit requirements typically

  Because it’s a property sale and not a loan, sale-leaseback programs typically don’t require proof of income, employment, or a minimum credit score.

• Stay in your home

  You can continue living in the property as a renter, often without responsibility for major repairs, property taxes, or maintenance.

Cons

• Loss of homeownership status

  You give up ownership at closing, which means you can be evicted if you miss rent payments—and rents may rise over time.

• No longer building equity

  Once the home is sold, you stop accumulating equity and won’t benefit from future appreciation unless the agreement includes a buy-back option.

• Less regulatory protection

  Sale-leasebacks aren’t governed by the same consumer-protection rules as mortgages or HELOCs, so terms and safeguards vary widely between companies.

When a sale-leaseback makes sense

Consider this option if you absolutely cannot qualify for any loan product or need maximum equity access quickly. It works if short-term housing stability is needed while planning your next move.

However, avoid sale-leasebacks if you want to maintain homeownership or plan to stay long-term.

4. Cash-out refinance loan

A cash-out refinance replaces your current mortgage with a larger one, and you receive the difference in cash.

For example, if you owe $150,000 on a home worth $300,000, you might refinance for $200,000 and receive $50,000 cash (minus closing costs).

Who qualifies for a cash-out refinance loan?

Requirements are similar to standard mortgages but often slightly stricter. Lenders typically want credit scores of 620 or higher and DTI ratios below 43%.

You’ll also need sufficient equity, with lenders usually requiring you to maintain at least 20% equity after the cash-out.

Pros

• Single monthly payment

  A cash-out refinance replaces your existing mortgage and consolidates everything into one monthly payment, which can simplify budgeting.

• Potential for lower interest rate

  If current mortgage rates are lower than the rate on your existing loan, a cash-out refinance may reduce your interest costs.

• Interest may be tax-deductible

  If the funds are used to buy, build, or substantially improve your home, the interest on a cash-out refinance may qualify for a tax deduction.

Cons

• Closing costs

  Refinancing comes with closing costs that can run into the thousands, which reduces how much you actually walk away with.

• Resets your mortgage term

  Taking out a new 30-year loan extends your payoff timeline, which means paying interest over a longer period. Even with a lower rate, this can increase your total interest paid.

• Not ideal if rates are high

  If current mortgage rates are higher than the rate on your existing loan, refinancing could make your monthly payment and overall borrowing cost more expensive.

When a cash-out refinance makes sense

A cash-out refinance makes the most sense when you can secure a new mortgage rate that’s close to—or lower than—your current rate. In that situation, you may be able to access equity without dramatically increasing your borrowing cost.

It can also be a smart option if you need a larger lump sum for a major expense, like high-interest debt consolidation or a substantial home improvement project, and you plan to stay in your home long enough to recoup closing costs.

However, if today’s rates are much higher than your current mortgage rate, refinancing can be significantly more expensive than alternatives like a HELOC or home equity loan.

If a client wants to take out equity in their home for home improvements or deferred maintenance projects and the need is not urgent, my first recommendation is to work on improving their financial situation so they can eventually qualify for a home equity loan or HELOC. If the need is urgent and they have the ability to pay off the loan quickly, I would suggest a non-equity alternative. 

Non-equity alternatives to consider

If accessing your home equity seems too risky or expensive, consider these alternatives that don’t involve your property:

• Personal loan: Unsecured personal loans typically range from $1,000 to $100,000 with fixed interest rates and repayment terms of two to seven years. They’re generally easier to qualify for than home equity products, but expect higher interest rates. View our recommendations for the best personal loans.
• Personal line of credit: This revolving credit option works similarly to a credit card but often with lower rates. You only borrow what you need when you need it and pay interest only on the amount used, making it flexible for ongoing or unpredictable expenses. View our recommendations for the best personal lines of credit.
• Credit card: For smaller expenses, a 0% APR promotional credit card can provide interest-free financing for six to 24 months if you can pay off the balance during the promotional period. However, any remaining balance after the promo period ends will accrue interest at the card’s standard rate.
• 401(k) loan: When you borrow from your retirement savings via a 401(k) loan, you’re paying interest to yourself. However, you’ll miss out on investment growth and may face taxes and penalties if you can’t repay or leave your job.

Take time to research and compare all of your options from multiple lenders and providers before making a decision.

Generally, I recommend equity financing for larger loan amounts that are used to improve your home. In these cases, the money used can potentially increase the value of the home and the interest is tax deductible.

If the amount needed is smaller or short-term and used for another purpose, I suggest looking into non-equity financing options. Either way, it’s important to ensure that the payments fit into your budget and long-term goals (if applicable) and have a plan to pay off the debt. 

FAQs

What is the easiest home equity loan or HELOC alternative to get?

An unsecured personal loan is usually the easiest option because it doesn’t require an appraisal or using your home as collateral. A 0% intro APR credit card can also be easy to qualify for if you have strong credit, but it’s best for smaller, short-term borrowing.

Are home equity alternatives safe?

Many are safe, but it depends on what you choose. Personal loans and credit cards don’t put your home at risk. Options like cash-out refinancing, reverse mortgages, and home equity agreements can be safe too, but they’re more complex and may carry higher long-term costs.

What is the cheapest way to borrow against home equity?

A HELOC is often the cheapest for short-term borrowing because you only pay interest on what you use. A fixed-rate home equity loan may be cheaper if you want predictable payments. Cash-out refinancing is only the cheapest when it also lowers your mortgage rate or replaces much higher-interest debt.