What Is a Home Equity Agreement?

A Home Equity Agreement (HEA) — sometimes called a home equity sharing agreement, home equity investmento shared equity agreement — is a financial arrangement between a homeowner and an investor. Under this arrangement, the homeowner gets a lump-sum payment today in exchange for sharing a percentage of the home’s future value with the investor.

Unlike a traditional home equity loan o HELOC, a HEA typically does not require monthly payments or interest. Instead, repayment happens when the house is sold, refinanced, or at the end of a fixed term.

How a Home Equity Agreement Works

Here’s a step-by-step overview of how HEAs generally work:

Benefits of a Home Equity Agreement

• No monthly payments or interest – Because it isn’t a traditional loan, you’re not burdened with monthly fees.
• Access to cash without new debt – Good option if you have equity in your home but don’t want to take on more loan payments.
• Flexible use of funds – The money can go toward home improvements, paying off higher-interest debts, or other personal needs.
• Easier qualification – Since there are no monthly payments, some HEA providers are more lenient about credit scores, income stability, or debt-to-income ratios.

Potential Risks & Drawbacks

• Giving up future appreciation – If your home value increases significantly, the investor gets a portion — which could end up costing more in value than what you received.
• Repayment cost can be unpredictable – Since repayment depends on future home value, making accurate predictions is difficult. Market fluctuations matter.
• Fees and closing costs – There are often origination fees, appraisal fees, and legal or closing costs. These reduce the net amount you receive.
• Contract limitations – Some agreements may place restrictions on how the home can be modified or require you to maintain a certain condition.
• Availability & eligibility – HEAs aren’t offered everywhere, and terms vary widely among providers. Property type, location, and amount of existing equity can affect eligibility.

Is a Home Equity Agreement Right for You?

You’ll want to ask yourself some questions before deciding whether an HEA makes sense. Here are scenarios where it might be a good fit, and when other options could be better:

Good fit if:

• You have substantial equity in your home.
• You’d rather avoid monthly payments or don’t want more debt.
• You need cash for a large expense but may not qualify for a traditional loan or HELOC.
• You are comfortable with sharing future appreciation and uncertain repayment amount.

Other options to consider:

• Traditional home equity loans – if you prefer predictable payments.
• HELOCs – flexible borrowing with revolving access to funds.
• Cash-out refinancing – replacing your existing mortgage with a larger one to access equity.

How to Explore a Home Equity Agreement with ALCOVA

If you’re interested in exploring a HEA, here are steps you can take with Hipoteca ALCOVA:

1. Check your home equity: Use our home equity calculator to estimate how much equity you have.
2. Talk with ALCOVA experts: Speak with a loan officer about HEA options and whether your property qualifies.
3. Compare HEA vs. other products: We can help you compare HEA terms with ALCOVA’s home equity loans, HELOCso cash-out refinancing.
4. Review agreement terms carefully: Understand what share of future value you’ll give up, any fees, and what triggers repayment.
5. Make a decision aligned with your goals: Whether it’s improving your home, lowering debt, or accessing cash, our team will guide you every step of the way.

FAQ: Home Equity Agreements

Do I still own my home with a HEA?
Yes. You retain ownership of the home and live in (or use) it, just with an agreement that some of the future value will be shared with the investor.

When is repayment required?
Repayment typically occurs when you sell, refinance, or reach the end of the term of the agreement. Some agreements allow early buy-out.

What happens if the home loses value?
If the home depreciates, the investor’s share of value will adjust accordingly. You may owe less in appreciation, but terms vary by agreement.

Final Thoughts

A Home Equity Agreement can be a valuable tool for homeowners looking to unlock cash without incurring new monthly obligations or interest payments. However, it comes with trade-offs — mainly sharing future gains in home value and understanding the uncertainties of repayment.

At Hipoteca ALCOVA, we’ll help you compare all your options — from HELOCs to home equity loans to cash-out refinancing — so you can make the best decision for your financial future.