A Home Equity Investment is not a loan. A third-party investor pays you a lump sum today in exchange for a share of your home's future value. There is typically no monthly payment. Instead, you settle the investment when you sell, refinance, or hit a maturity date.
The investor takes a position based on your home's current appraised value and an agreed share. When the contract ends, you owe back the original advance plus or minus a share of how the home's value has changed. Terms commonly run 10 to 30 years.
HEIs are most often considered by homeowners with strong equity but limited monthly cash flow, or by homeowners who do not qualify for traditional financing. The appeal is no monthly payment.
The cost shows up at the back end as a share of your home's appreciation, which can be expensive in a rising market. Contract terms vary widely. Read the agreement carefully and model the total cost under different home-value scenarios before signing anything.
Mortgage Today is an educational brand and does not originate, broker, or fund loans of any kind, including Home Equity Investments. Inquiries are forwarded to a licensed loan officer in our network. The information above is provided for education only. If you would like a neutral walk-through of how an HEI compares to a HELOC, home equity loan, or cash-out refinance, book a call below.
Related glossary terms
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Both let you tap home equity. The right tool depends on what you need the money for, how long you need it, and what your current first mortgage looks like.
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