What Is a Home Equity Agreement (HEA/HEI) and How Does It Work?
A home equity agreement, also called a home equity investment, gives you cash now in exchange for a share of your home's future value. There's no interest rate and no monthly payment. You repay in one lump sum when you sell or when the contract ends, often 10 to 30 years later. Because the payoff depends on what your home is worth then, the cost isn't known up front, and the CFPB found it's often much higher than home-secured loans.
Last updated September 29, 2026How does it work?
A company pays you a lump sum today. In return, it gets a share of your home's value when the agreement ends. You keep living in and owning the home, and you don't make payments along the way. The company's return depends on how much the home's value changes over the term.
How do I pay it back?
In one lump sum, when you sell the home or when the term ends, often 10 to 30 years out. The amount is tied to the home's value at that point, not to a fixed balance, so you won't know exactly what you'll owe until then. The CFPB notes that payoffs can reach hundreds of thousands of dollars.
How much does it really cost?
With no stated interest rate, it can look cheaper than it is. In a January 2025 report, the CFPB worked out equivalent annual rates. With home values rising 6% a year, the cost came to about 20% a year if the contract ended after 3 years and about 14% after 10 years. Even in a scenario where values fell 30% and then recovered slowly, it ran from about 15% at 3 years to 6.5% at 10. The CFPB concluded these costs are substantially higher than the rates on most home-secured credit.
What are the alternatives?
It depends on your situation:
- You want no monthly payment and you're under 62: a home equity agreement is one of the few options, but its cost is uncertain and can be high. A home equity loan or line of credit has a monthly payment but a cost you can calculate ahead of time.
- You're 62 or older: a reverse mortgage (HECM) also has no monthly payment. Its cost is interest that adds to the balance, which is easier to predict than a share of future value.
- You can handle a monthly payment and want a predictable cost: a cash-out refinance or a fixed-rate home equity loan sets the rate at closing.
| Monthly payment | None |
|---|---|
| Repayment | One lump sum at sale or the end of the term |
| Typical term | Often 10 to 30 years |
| Equivalent annual cost, 6% yearly appreciation (CFPB) | About 20% at 3 years; about 14% at 10 years |
| Compared with home-secured loans | Substantially higher cost, per the CFPB |
Related questions
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- can I still pull equity out of my home if I already have a reverse mortgage, even if my current reverse-mortgage lender won't help
- is the Interest on a Home Equity Loan or HELOC Tax Deductible
- what Are Texas's Special Rules for Home Equity Loans and Cash-Out Refinancing
- what determines your mortgage rate quote
Sources
- https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-home-equity-contracts-market-overview
- https://www.consumerfinance.gov/consumer-tools/reverse-mortgages/
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.