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What is a Home Equity Sharing Agreement?

by | Jun 5, 2024 | Blog

Home $ Blog $ What is a Home Equity Sharing Agreement?

Many homeowners often seek ways to access their home equity for cash. Traditional methods include home equity loans and lines of credit, but there’s another option: a home equity sharing agreement.

Known also as a shared equity agreement or shared equity finance agreement, this arrangement typically involves a homeowner and a professional investor. The investor provides a lump-sum loan in exchange for partial ownership of the home or a share of its future appreciation. Unlike traditional mortgages, homeowners don’t make monthly payments. Instead, they repay the amount when they sell the home or at the end of a set period, often ranging from 10 to 30 years.

Home equity sharing agreements are ideal for those who might struggle to qualify for traditional loans due to poor credit or temporary financial difficulties. Here’s a closer look at how these agreements work, their benefits and drawbacks, and who might benefit from them.

How Does a Home Equity Sharing Agreement Work?

If you’re considering this option, here’s a general overview of the process, which shares similarities with applying for other types of home-secured financing:

  1. Select a Company: You can enter into an agreement with an individual investor, but many choose home equity investment companies. Compare different companies based on fees, repayment terms, and equity sharing models.
  2. Prequalify for Funding: After choosing a company, you can prequalify to get an idea of how much you might borrow, which helps if you have a specific amount in mind.
  3. Apply for Funding: If prequalification looks favorable, submit a formal application. Be ready to provide personal and financial information, verify your identity, and schedule a home appraisal.
  4. Get Funding: Approval times are often short, sometimes just a few days.
  5. Repay the Money: No monthly payments are required, but you will repay the investment and any additional agreed-upon appreciation percentage at the end of the term or when you sell the home.

Types of Home Equity Sharing Agreements

There are two common types:

  1. Share of Appreciation Model: You repay the loan amount plus a percentage of your home’s future appreciation.
  2. Share of Home Value Model: You repay a percentage of the home’s value at sale time. If your home’s value declines, you might repay less than the original loan.

Investors often adjust your home’s appraisal value to mitigate risk, which can make it seem like your home has appreciated.

Pros and Cons of Home Equity Sharing Agreements


  • Flexible Qualifications: Some companies have lower credit score requirements, making it easier to get funding if you have poor credit.
  • No Monthly Payments: There are no monthly obligations as with traditional mortgages.
  • No Interest: You receive an investment, not a loan, so no interest is incurred.
  • Flexible Funding: Use the funds for any purpose, from home improvements to debt consolidation.


  • Large Repayment Amount: At the end of the term, you must repay the investment and the investor’s share of appreciation, which might require selling your home.
  • Limited Availability: Fewer companies offer these agreements compared to traditional lenders, and they might not operate in your state.
  • Limited Funds: You can usually borrow less than with traditional loans, often around one-third of your equity.
  • Reduced Profit from Home Sale: Significant appreciation means you’ll share more profit with the investor. Conversely, if the value declines, repaying the initial funds might be difficult.

Where to Get a Home Equity Sharing Agreement

Popular companies offering these agreements include Hometap, Unison, Unlock, and Point. Compare their reputations, repayment terms, fees, and the percentages of your home’s appreciation or value they’ll take.

Usage of Funds from a Home Equity Sharing Agreement

Generally, you can use the funds for any purpose, such as debt consolidation, home renovation, or even vacations. However, some companies might set conditions based on your credit score and debt-to-income ratio.

Fees Associated with Home Equity Sharing Agreements

Expect transaction fees around 3 to 5 percent, plus third-party fees for appraisals and administrative costs. These are often deducted from the funding proceeds. Some companies also apply a risk adjustment to the home’s value, affecting the funds you receive and the payout calculation.

When Does a Home Equity Sharing Agreement Make Sense?

These agreements are suitable for homeowners who are house-rich but cash-poor, have substantial home equity but poor credit or irregular income, and find it hard to qualify for traditional loans. However, if you have good credit, manageable debt, and stable income, traditional loans might be better.

Always consider the pros and cons and evaluate whether a home equity sharing agreement aligns with your financial situation. In some cases, improving your financial profile and opting for traditional equity-tapping methods could be more beneficial.


Home equity sharing agreements offer a unique alternative for homeowners seeking to access their home’s equity, especially those facing credit challenges or financial instability. By partnering with investors, homeowners can unlock the value of their property without the burden of monthly payments. However, it’s crucial to weigh the benefits against the potential drawbacks, such as the significant repayment amount and reduced profit from home sales. Carefully evaluating your financial situation and comparing different providers will help determine if this option is the right fit for you.

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Donnell Bailey

Property expert

Donnell is a property expert focusing on the property market, he looks at a combination of legislation, information from property managers, letting agents and market trends to produce information to help landlords.