What Is a Home Equity Agreement (HEA Loan), and How Does It Work?

If you’re a homeowner sitting on valuable equity but don’t want to add another monthly bill, a home equity agreement (HEA loan) could offer a flexible alternative. It lets you access your home’s value in exchange for giving a share of its future worth to the provider.

Unlike a traditional home equity loan or line of credit, HEAs don’t require monthly payments. However, they can become expensive over time, especially if your home’s value skyrockets.

Here’s how HEA loans work, what to expect before applying, and when this option might make sense for your financial situation.

Table of Contents

1. What is a home equity agreement (HEA loan)?
2. How it works
   1. Example
3. Requirements
4. Costs and fees
   1. Example
5. Pros and cons
6. HEA vs. traditional home equity loans and HELOCs
7. When an HEA might make sense
8. How to get a home equity agreement
9. Alternatives
10. FAQ

What is a home equity agreement (HEA loan)?

A home equity agreement (HEA), sometimes called a home equity investment or shared equity agreement, is a type of home equity financing. It gives you a lump sum today in exchange for a portion of your home’s future value.

You’ll repay the provider’s share when you sell your home, refinance, or buy out the agreement. Because repayment depends on your home’s future price, what you owe can be higher or lower than the amount you received upfront.

Why homeowners consider HEAs:

• No monthly payments while the agreement is active
• May qualify with lower income or credit (500 – 550+ typical)
• Can use funds for almost any purpose

However, you’ll likely pay more in the long run compared to a home equity loan or HELOC.

Quick comparison:

Feature	HEA loan	Home equity loan / HELOC
Monthly payments	None until repayment	Required monthly
Credit needed	500+ often accepted	620+ typical
Ownership	You keep title; provider records a lien or contract interest	Fully retained
Repayment	When you sell or buy back	Monthly + interest
Cost predictability	Variable (based on home value)	Fixed or variable interest

Our top choices let you get free quotes to see how much funding you might be eligible for while evaluating the costs.

How a home equity agreement works

A home equity agreement works like a partnership between you and the provider. You get cash now, and the provider receives a share of your home’s future value later.

Here’s what the process usually looks like:

1. Get a home appraisal

The provider orders an appraisal to determine your property’s current market value. Some adjust that value slightly downward to limit risk.

2. Review your offer

You’ll see how much cash you can receive (typically 10% to 35% of your home’s value) and the share of future value you’d owe when you settle.

3. Accept and get funding

If you move forward, you’ll sign the agreement and receive the funds, often within two to four weeks.

4. Repay when you sell or refinance

You’ll repay the provider’s share when you sell your home or buy out the agreement. The amount depends on your home’s value at that time.

Example

Let’s say your home is worth $500,000, and you receive $50,000 in exchange for 20% of its future value.

• If your home’s value rises to $600,000, you’d owe $70,000 (the $50,000 you received + 20% of the $100,000 appreciation).
• If your home’s value drops to $450,000, you’d owe $40,000, less than you received upfront.

That flexibility can help in slower markets, but it also means your repayment cost is unpredictable.

Requirements

Every HEA provider has its own eligibility standards, but they’re generally more flexible than banks offering home equity loans or HELOCs. You’ll still need to meet certain baseline criteria related to your credit, equity, and property.

Here’s what most HEA providers look for.

• Home equity: You’ll typically need at least 20% to 25% equity in your home. That means if your home is worth $400,000, your total mortgage balance should be below $320,000.
• Credit score: Most companies accept credit scores of 500 to 550 or higher, making HEAs accessible to homeowners who might not qualify for traditional financing.
• Property type: Single-family homes and some townhomes or condos usually qualify. Multi-unit, manufactured, or investment properties are often excluded.
• Primary residence: You must live in the home as your primary residence in most cases, though a few providers may allow second homes.
• State availability: HEA programs are not available in every state. Some providers operate in fewer than half of the U.S., so check availability before applying.
• Debt-to-income ratio: Some companies may review your debt-to-income ratio (DTI), but limits are typically more lenient (up to around 45%).

Home equity agreement costs and fees explained

Home equity agreements can be more expensive than they first appear, especially if your home appreciates. Beyond the future repayment amount, you’ll also pay several upfront and closing costs.

Common HEA costs include:

• Origination or closing fee: Usually 3% to 5% of the funding amount
• Appraisal fee: Around $300 – $1,000, depending on property size and location
• Title and settlement fees: Typically $800 – $1,200
• Recording and administrative fees: Vary by county, often a few hundred dollars

These expenses are often deducted from your funding before you receive your cash.

Example

If you qualify for a $50,000 HEA with a 4% origination fee and $1,000 in other costs, you’d receive about $46,000 after fees.

Compare quotes from multiple reputable HEA providers to see how fees and terms differ; they can vary widely by state and home value.

Pros and cons

A home equity agreement can be a creative way to tap into your home’s value, but it’s not right for everyone. Here’s a look at the biggest advantages and drawbacks to help you decide whether it fits your situation.

Pros

• Easier to qualify for

  You may be eligible with a lower credit score or limited income, making HEAs appealing for homeowners who don’t qualify for traditional home equity loans.

• No monthly payments

  Instead of repaying month by month, you’ll make one lump-sum payment when you sell your home, refinance, or buy out the agreement.

• Flexible use of funds

  You can use the cash for nearly anything, such as home improvements, debt consolidation, medical bills, or covering unexpected expenses.

• Shared downside risk

  If your home value drops, the provider’s share usually decreases too. That can soften the impact of selling in a weaker housing market.

Cons

• You’ll give up part of your home’s appreciation

  If your home gains significant value, you’ll owe more at repayment. That future cost can far exceed what you’d pay in interest on a loan.

• Total cost is unpredictable

  Because repayment depends on your home’s future value, you won’t know your true cost until you sell or settle.

• Large balloon payment

  You’ll need to repay the full amount in one go, which can require selling your home or taking another loan.

• Limited state availability

  HEAs aren’t offered everywhere, and eligibility varies by property type and location.

Home equity agreements make sense for certain homeowners, but only if you understand the trade-offs. If you’re confident your home value won’t soar or you plan to sell soon, the flexibility might outweigh the cost uncertainty.

HEA vs. traditional home equity loans and HELOCs

If you’re deciding between a home equity agreement and a more traditional option, it helps to see how they compare side by side.

Feature	HEA loan	Home equity loan	HELOC
Monthly payments	None until repayment	Fixed payments	Variable payments
Interest	No monthly interest; repayment tied to future home value	Fixed rate	Variable rate
Credit score needed	500 – 550+ typical	Mid-600s typical	620+ typical
Ownership	You keep title; provider records a lien or contract interest	You keep full ownership	You keep full ownership
Repayment timing	When you sell, refinance, or buy out	Monthly	Monthly
Cost predictability	Variable	Predictable	Varies with rates
Best for	Homeowners with strong equity but limited credit or income	Borrowers who want fixed payments	Those needing ongoing access to funds

Before choosing, estimate how much your home’s value could rise over the term of your agreement. That can help you gauge whether the potential repayment would still make sense.

When a home equity agreement might make sense

An HEA loan can be a smart option in the right circumstances, especially if your credit or income make it hard to qualify for other home equity products. But because repayment is tied to your home’s future value, it’s not ideal for everyone.

When an HEA might make sense

• You need cash but can’t afford another monthly payment. HEAs let you unlock your equity without adding a new bill to your budget.
• Your credit score is on the low side. Many providers accept borrowers with scores as low as 500.
• You’re planning to sell your home soon. If you expect to move within a few years, the short-term flexibility can outweigh long-term costs.
• You’re facing temporary financial stress. HEAs can bridge the gap while you rebuild your income or refinance later.

When an HEA might not make sense

• You have good credit and a steady income. You could likely qualify for a lower-cost home equity loan or HELOC.
• You want to maximize your home’s appreciation. Because HEAs take a share of future value, they reduce your potential gain when you sell.
• You’re not sure how you’ll repay. If you want to stay in your home long-term and can’t plan for a large balloon payment, a traditional loan is usually safer.

The first thing I ask clients to consider is why they need the funds. If it’s for a want, not a need, or if waiting could help you improve your credit, you might be better off qualifying for a lower-cost loan later.
But if your budget is tight and you can’t afford monthly payments, an HEA could be a reasonable short-term solution. Just be sure you have a repayment plan in mind.

How to get a home equity agreement

Once you’ve evaluated your options, the image below outlines the steps you can take to apply for a home equity agreement:

Alternatives

If you’re on the fence about an HEA, it’s worth comparing your other options. You might find a more predictable or affordable path to access your home’s value.

Home equity loan

A home equity loan is a fixed-rate loan that provides a lump sum with regular monthly payments. It’s ideal if you want predictable costs and can handle another bill..

Home equity line of credit (HELOC)

A HELOC is a revolving line of credit that you can borrow from as needed. It offers flexibility but comes with variable rates and required payments..

Cash-out refinance

A cash-out refinance replaces your current mortgage with a larger one, letting you withdraw the difference in cash. It can lower your interest rate but restarts your mortgage term.

Home sale-leaseback

A home sale-leaseback lets you sell your home and stay in it as a renter. This can provide quick cash, but you’ll lose ownership and start paying rent.

FAQ

Is a home equity agreement (HEA) a loan?

Yes. A home equity agreement is a type of home equity financing that provides a lump sum in exchange for a share of your home’s future value. You’ll repay the provider when you sell your home, refinance, or buy back the agreement.
Unlike traditional loans, repayment depends on how your home’s value changes, but it still creates a financial obligation secured by your property.

How long does it take to get funds from an HEA loan?

Most HEA loans fund within three to six weeks, depending on how soon the appraisal and state-specific paperwork are completed. Some providers advertise faster turnarounds for qualified homeowners.

Starting the application with your property details and address can help providers confirm state eligibility early and shorten the process.

Can I sell or refinance my home after getting an HEA?

Yes, but the provider’s share must be repaid at closing.

If you refinance, you’ll need to buy out the agreement or ensure the new lender agrees to the HEA’s lien position. Selling your home automatically triggers repayment based on the current property value.

Do home equity agreements affect taxes?

HEA proceeds are typically not taxed as income, but rules vary. The IRS may treat the transaction differently depending on your state, property use, and agreement structure.

Always consult a tax professional before signing an HEA contract to understand potential capital gains or deduction implications.

What happens if my home loses value?

If your home depreciates, most HEA providers share in that loss. That means you’ll repay less than you received upfront, but your equity position will also shrink. While this feature offers some downside protection, it doesn’t eliminate risk if you sell for less than your mortgage balance.