If you’re interested in a home equity sharing agreement, the list below will help you choose the best provider for your unique financial situation. Our top picks include options for homeowners with a low credit score, those with no income, those looking to finance a remodel and more.
You’ll also find links to our in-depth reviews of each company mentioned. Home equity sharing agreements are complex contracts, and it’s important that you go in with some knowledge of how each company operates. As such, we strongly recommend referring to our detailed reviews before applying.
What Is Home Equity Sharing?
A home equity share agreement allows you to access your home’s equity today for a share of its future appreciation.
That means you’ll receive cash up-front with no monthly payments. In exchange, the investment company takes an agreed-upon percentage stake in your home, sharing both the upside and (in some cases) any downside.
The investment company receives its payback when you sell your home (or at the end of the contract term). The amount you owe is based on your home’s value at the time of the sale.
Overall, home equity sharing is attractive for homeowners who have 30% or more equity in their home and who don’t qualify for traditional HELOC/home equity loans due to their credit or income.
Best Home Equity Sharing Companies
Hometap is ideal for those with average credit. It allows for a loan-to-value ratio of up to 75% with a maximum agreement length of 10 years.
- You can borrow up to 30% of your home’s value, with a maximum dollar figure of $400,000.
- Offers renovation adjustments, so improvements to your home are not included in the calculation of the home’s appreciated value.
- There’s no firm income or credit score requirements (although most applicants have scores of at least 600 and hold 25% or more equity in their property).
- There’s a forced sale risk if you’re unable to pay Hometap after 10 years when Hometap’s payback is due.
- Hometap does not currently invest in vacation homes.
Point allows for agreements up to 30 years in length. It allows for a loan-to-value ratio of up to 70% and you can buy back your equity at any time without repayment penalties.
- Offers contracts as long as 30 years in length.
- Requires a minimum investment of $35,000 and has a maximum of $350,000.
- The minimum credit score required is just 500.
- You must have at least 30% equity in your home after Point’s investment.
- There are no requirements for income or liquid assets.
- Promotional pricing is available if using the funds you receive for a renovation, but any appreciation due to that renovation is factored into what you owe.
- Accepts rental properties but does charge a premium for them.
Although only available in nine states and the District of Colombia, Noah is an attractive option for those looking to pay back their loan quickly, as they offer prepayment discounts of up to 10%.
- Has a high minimum property value to qualify ($300,000).
- Your home must be worth at least $300,000 with a loan-to-value ratio of 85% or less to qualify.
- The minimum credit score is 600.
- Offers a short contract term length of 10 years.
- Appreciation due to renovations is included in your payback calculation.
With agreements up to $500,000, Unison is ideal for homeowners with high-value properties. However, their minimum credit score is 650 and their maximum loan amount is 17.5% of your home’s value.
- The maximum loan-to-value ratio is 75%, although a high credit score is required to obtain this amount.
- Offers terms of up to 30 years.
- Available in more than two dozen states (the largest number among home equity sharing providers).
- Offers a remodeling adjustment to exempt appreciation attributable to renovations.
4 Tips to Consider Before Choosing a Home Equity Sharing Company
- Thoroughly review the contract, and (ideally) have a third-party review it as well. It’s not that home equity share companies are trying to scam you; these are legitimate companies that provide a valuable service. It’s more so that these contracts are complex and you don’t want to be surprised when payment comes due.
- Pay close attention to fees both at origination and upon the completion of agreement. Expect to pay fees upon entering and exiting home equity share agreements. Each company’s fee structure is a bit different. For example, while Hometap charges a 3% closing fee, Point uses a risk adjustment that lowers the amount of the agreed-upon value of your home.
- Compare at least two home equity providers. You won’t find out a lot of important variables with each company until well into the underwriting process. In other words, what you see upfront may be different from what you’re offered in the end.
- Know your exit strategy. Have a plan for how (and when) you will buy out the investment company. Calculate the associated costs using a good, better, best scenario (an example of which can be found in our Point Review).
Pros and Cons of Home Equity Sharing
- Home equity sharing provides equity-rich homeowners with low incomes and/or bad credit an option for getting up-front cash.
- The lack of monthly payments can help improve your existing cash flow.
- In some cases, the company shares in the losses if your home declines in value. While this is not a common scenario, it does mean that you can potentially generate a net profit by paying back less than you received.
- An equity sharing agreement is not as simple to understand as a HELOC or home equity loan. They’re complex contracts and each company’s agreement is different.
- You lose some of the upside if your home appreciates.
- Similar to a refinance, there are a number of associated fees.
- These agreements are not available in every state.
Home Equity Sharing vs. HELOC/Home Equity Loan vs. Reverse Mortgage
Two alternatives to home equity sharing are:
- Home Equity Lines of Credit (HELOCs) and home equity loans.
- Reverse mortgages.
Traditional financing options like HELOCs and home equity loans are typically more favorable for homeowners than home equity sharing agreements.
Not only can you lock in a guaranteed interest rate with these loans, and thereby reduce your risk, the fees are typically a lot less.
As an example, Hometap charges 3% of your investment amount — taken out of your initial proceeds — as a closing fee. This is separate from the appreciation you’ll pay back if your home increases in value.
With interest rates still at historic lows, it’s possible to get a home equity line of credit in the range of 4% to 6% with very minimal fees.
The caveat is that the lending guidelines for these types of loans are strict. In most cases, qualifying means having at least an average credit score and sufficient cash flow to pay back the loan.
A reverse mortgage is a type of agreement that allows homeowners aged 62 years and older to borrow money upfront using their existing equity. Similar to home equity share agreements, no monthly payments are due.
The big difference is that the money borrowed via a reverse mortgage is a loan. That means interest and fees are added to the loan balance each month. The balance then grows the longer you keep the reverse mortgage agreement in place, and is paid back once you sell the home.
Best Home Equity Sharing Companies: Final Thoughts
Home equity sharing companies enable home-equity-rich homeowners with bad credit or low incomes to get their hands on some of their home’s value today, in the form of a lump sum payment, in exchange for giving up some of the home’s future upside.
If you qualify for a traditional home equity loan or HELOC, it’s likely to be a better (and lower-cost) option long-term.
But for equity-rich homeowners who can’t take on the monthly payments or don’t qualify, home equity sharing agreements are a reasonable alternative.