What is a home equity sharing agreement, and is it worth the trade-off?

Written by Samantha SheltonNMLS 1647301Updated November 2026

A home equity sharing agreement, also sold as a home equity agreement (HEA), a home equity investment or a shared equity agreement, is a contract in which an investor pays you a lump sum today for a percentage of what your home is worth later. There is no monthly payment and no interest rate, so the price hides inside the percentage: an agreement that pays you $40,000 against a $400,000 home and takes 25% of its value at settlement returns $130,000 to that investor if the home reaches $520,000, a $90,000 cost on a $40,000 advance.¹

You keep the deed and every obligation attached to it: the mortgage, the taxes, the insurance, the roof. What you sold is a claim on the house’s future value, settled in cash when you sell, refinance, buy the investor out, or hit the end date. No government program sets any of it.

Learn how a home equity sharing agreement works, what it costs at rising, flat and falling values, which clauses decide the outcome, and how it compares with borrowing against the same equity. For the wider menu, start with our Loan Types & Programs guide.

Key takeaways:

• The price is a percentage, not a rate: Contracts are written so the investor’s share of value exceeds the share you were paid, which is why a $40,000 advance can settle at $130,000 on a $520,000 home.
• 4 events end the agreement: A sale, a refinance that pays the investor off, a voluntary buyout, or the maturity date, and all 4 demand a lump sum, with no monthly payments in between to chip away at it.
• One clause decides everything: Whether the investor takes a share of total value or only a share of appreciation is worth $42,000 at the same $520,000 sale price in the example below, so get a written illustration at 3 future values before you sign.

What is a home equity sharing agreement?

A home equity sharing agreement is a contract that converts part of your home’s future value into cash today, with the investor paid from the home rather than from your income. The Consumer Financial Protection Bureau puts the older, mortgage-shaped version of the bargain plainly: under a shared appreciation mortgage, you agree to give your lender a share of any increase in your home’s value.

The modern version runs through an investor rather than a bank. The provider orders an appraisal, offers a lump sum expressed as a percentage of that value, records something against your title, and then waits. There is no amortization schedule and no statement showing a shrinking balance. The obligation just sits there, growing or shrinking with your local housing market.

That makes an HEA a different animal from the products in our Specialty Financing hub that still behave like loans. It belongs beside the newer structures in innovative mortgage products: real tools for real situations, priced for the risk the provider takes, sold without an agency rulebook behind them.

Equity sharing vs. home equity loan vs. HELOC vs. cash-out refinance

All four put cash in your hand using the same equity. They differ in who carries the risk, what triggers repayment, and whether you can price it in advance.

A home equity loan hands you a lump sum at a fixed rate with a payment you can see before you sign, which is why our breakdown of home equity loans, pros and cons treats certainty as the feature. A home equity line of credit charges you only on what you draw, carries a variable rate, and can be frozen or reduced by the lender. A cash-out refinance replaces your mortgage outright, which is why Fannie Mae requires at least one borrower on title for six months before disbursement and an existing first mortgage at least 12 months old, note date to note date.

All three are debt with a knowable price. The equity sharing agreement is the only one you sign without knowing what it costs.

How much does a home equity sharing agreement cost?

It costs whatever the settlement formula produces, and the biggest variable is not your home’s value. It is whether the contract takes a share of value or a share of appreciation. Same house, same sale price, and the two structures settle tens of thousands apart. Take a $400,000 home and a $40,000 advance, settled 10 years later. Structure A gives the investor 25% of the home’s value. Structure B gives it the $40,000 back plus 40% of the gain.

Read the falling-value row twice. Under a percentage-of-value structure the home loses $40,000 and the investor still collects $90,000, because 25% of a smaller number is still a quarter of the house. Homeowners routinely assume the investor shares the downside. Sometimes it does. Often it does not, and the clause deciding it is one you have to go find.

Spread over 10 years, handing back $130,000 for $40,000 works out to roughly 12.5% a year compounded, and $90,000 to roughly 8.4%. Those are not rate quotes or APRs. Nobody can hand you one at signing, because the number does not exist until the house sells. That uncertainty is the product. Our guide to using home equity wisely covers when trading certainty for flexibility pays off.

What did the CFPB find when it studied home equity contracts?

The Consumer Financial Protection Bureau published its first market review of these products, Issue Spotlight: Home Equity Contracts: Market Overview, on January 15, 2025. The bureau calls them home equity contracts and describes the deal as an upfront payment from a company that the homeowner repays later in a single lump sum based in part on the home’s value, due at the end of a term of often 10 to 30 years or at a triggering event such as a sale.

According to the CFPB report, under many contracts the settlement amount grows at 19.5% to 22% a year in the early years, which the bureau describes as substantially higher than rates on most home-secured credit and somewhat lower than rates on unsecured debt like credit cards. Per the same report, a homeowner may be paid 10% of the home’s value in exchange for a 20% stake in its future value, and a company may set the starting value 25% below the appraised value, so the company comes out ahead unless the home’s price falls by more than 25%.

The bureau also priced a contract against a home equity line of credit. In its illustration, a $50,000 HELOC at 9% interest-only costs $375 a month, or $45,000 in interest over 10 years, and the borrower would still owe the original $50,000; the contract, advance included, settled at $94,074 to $215,892 across the report’s scenarios. The CFPB found the contract more expensive overall than the HELOC if the home appreciates, and less expensive only if the home’s value falls at least 5% from its starting value 10 years earlier. Hypothetical example, not an offer.

Marketing was the other finding. The bureau reported that companies often claim the contracts are “not a loan,” have “no interest” and involve “no debt.” It reviewed 38 consumer complaints about the products, and of the 21 with published narratives, six (29%) called them “predatory,” according to the spotlight.

What does a real home equity agreement look like on paper?

A federal appeals case lays out the terms of one signed contract. In an unpublished August 7, 2025 memorandum in Olson v. Unison Agreement Corp., the U.S. Court of Appeals for the Ninth Circuit described a Washington couple’s 2019 agreement: an advance of $64,750 in exchange for an option to buy, in the future, 70% ownership of their home, then valued at $370,000, for a further payment of $194,250. Together the two payments equal 70% of that $370,000 starting value. The couple paid $2,525 in fees to complete the transaction, and the provider’s rights were secured by a deed of trust recorded on the property, according to the court.

The option could be exercised at the contract’s expiration in 30 years or on a sale of the property, among other triggering events. The panel concluded that the arrangement was a “reverse mortgage loan” under Washington’s reverse mortgage act, and that the couple had adequately alleged that marketing it as involving no “loan,” “debt” or “interest” could deceive. It reversed the dismissal of their suit and remanded the case. The court marked the decision as not precedent except as provided by Ninth Circuit Rule 36-3, and it applies Washington law, not Michigan’s.

The risks that decide whether this is worth it

Six clauses do most of the damage, and five are invisible unless you go looking.

• The downside clause: Some agreements cut what you owe when the home depreciates. Others hold you to a percentage of value regardless, and some add a floor guaranteeing the investor a minimum return whatever the market did.
• The starting valuation: Many contracts do not settle against the appraised value. They apply a “risk adjustment” that lowers the baseline, quietly enlarging the investor’s share of every dollar of gain.
• Renovation exclusions: Spend $60,000 on a kitchen and some contracts credit that improvement back to you at settlement, while others share it with the investor. Where credit exists, it usually requires documentation filed at the time of the work.
• Early-exit terms: Buyouts are usually permitted, but a minimum holding period, an exit fee, or a new appraisal at your expense can all apply.
• The recorded interest: Providers typically record a lien, a deed of trust or a memorandum against your title, which can complicate or block a future cash-out refinance.
• Everything you still owe: Taxes, insurance, HOA dues, the mortgage and maintenance all stay yours, and falling behind is usually a default under the agreement, not just under your mortgage.

Raise the tax question early. Interest on borrowed home equity is deductible only when the proceeds buy, build or substantially improve the home securing the loan, within a $750,000 qualified-residence-debt cap ($375,000 married filing separately) for debt incurred after December 15, 2017. An equity sharing agreement has no interest to deduct at all. And because settlement usually lands at sale, the sale itself is what the tax rules act on: the main-home capital gains exclusion covers up to $250,000 of gain filing single, $500,000 jointly, if you owned and lived there at least 24 of the 60 months before the sale. How the investor’s share is treated in that calculation depends on how the contract is written, which is a question for your tax professional before you sign.²

If the equity is coming out either way, price the conventional route first. Our look at the pros and cons of cash-out refinancing shows what a knowable cost looks like.

Who qualifies, and where these agreements are available

There is no published eligibility matrix, because no agency stands behind these products, each provider writes its own box.³ What they share is what they underwrite: the house, not you.

• Substantial existing equity: The investor is buying a position behind your mortgage, so it needs room. Thin equity is the most common reason an application stops.
• Owner-occupied, in a served market: Coverage runs state by state and often county by county, and property types outside single-family and some condos are frequently excluded.
• A credit floor, but a lower one: With no payment to underwrite, minimums tend to sit below what a HELOC lender requires, and income documentation is lighter.
• A property in maintainable condition: Deferred maintenance hurts the investor’s exit, so condition matters more here than on a straightforward loan.

That profile explains the appeal. Self-employed owners whose returns understate their cash flow, retirees who are equity-rich and income-light, and owners rebuilding credit all land here for the same reason they land in alternative financing options: the traditional box is narrow and their finances are not. The box has widened, though. Documentation-flexible structures like physician mortgage loans and bank-statement programs qualify plenty of people who assume nothing conventional is open to them. Because Align is a broker, we can shop those and tell you honestly whether a real loan exists for you before you give away appreciation.

What does Samantha ask first when someone wants to tap equity?

She starts with the purpose. “Why. That’s my first question. What are we using the money for?” Samantha said in a September 13, 2026 interview, adding: “Your house isn’t an ATM. Equity is valuable. So there should be a reason behind using it.” An equity sharing agreement makes that question sharper, because its cost depends on a home value nobody knows yet.

Once the reason is clear, these steps put a real alternative beside the offer:

• Price two loan structures for the same amount: Compare a HELOC with a fixed second mortgage, and read how home equity is measured before you decide how much to take.
• Plan the exit if you expect to sell: Estimate what the sale leaves you with the seller net sheet calculator or the Michigan transfer tax calculator, review the capital gains exemptions that apply to a main home, and expect the provider’s recorded interest to be cleared at closing like other property liens, as in selling a home with a lien.
• Count the refinance costs too: If you might later refinance to buy the investor out, budget refinancing closing costs and run your own numbers on Align’s calculators.

8 questions to ask before you sign a home equity sharing agreement

Bring this list to the provider call and write the answers down. If any answer is “we’ll get to that in the documents,” treat it as a red flag.

1. Is the settlement a share of value or a share of appreciation? Worth more than the other seven combined.
2. What value does the formula start from? The appraisal, or a discounted number, and how big is the discount?
3. What happens if my home is worth less at settlement? Get the dollar figure at down 10% and down 20%, in writing.
4. Is there a minimum return, cap or floor? A cap protects you in a hot market. A floor protects the investor in a bad one.
5. What is the buyout formula, and when can I use it? Include any holding period, exit fee, and who pays for the appraisal.
6. Do improvements I pay for get excluded from the shared value? If yes, what must you document, and when?
7. What gets recorded against my title, and will you subordinate? A future refinance depends on the answer.
8. What are the total upfront costs? Origination, appraisal, title, and anything netted out of your proceeds.

Use two free outside opinions before you sign. A HUD-approved housing counselor can go through the agreement with you, and the CFPB’s resources on home financing decisions cover how to compare offers on the same terms. A real estate attorney reading the contract is money well spent.

Which states regulate home equity sharing agreements?

Only a handful. As of April 30, 2026, only a few state legislatures had enacted laws specifically regulating these contracts, Connecticut, Illinois, Maryland and Maine, according to an analysis by the law firm Mayer Brown, which also reported that Illinois law requires homeowners to receive independent counseling.

Sources: Connecticut Office of Legislative Research, report 2026-R-0028 (June 29, 2026); Maryland General Assembly, HB 1150 (2023); Maine Legislature, LD 1901; Mayer Brown, April 30, 2026 for the Maine requirements and Illinois counseling.

Connecticut’s law shows what a full disclosure looks like. According to the June 29, 2026 Office of Legislative Research report, lenders must state that the agreement gives the lender a mortgage and a shared interest in the property, so the borrower could lose the property. Repayment examples must cover settlement after 5, 10, 15 and 30 years, no change in value, and total changes of 10% depreciation, 3.5% appreciation and 5.5% appreciation, each with the total cost shown as an annual percentage rate for comparison with a traditional mortgage.

In Maine, per Mayer Brown’s summary, an agreement signed without independent counsel for the homeowner is presumed unconscionable. The National Consumer Law Center, which testified for the bill, said on April 17, 2026 that repayment under these contracts can exceed the cash a homeowner received by tens or even hundreds of thousands of dollars.

What Michigan homeowners should know

Michigan has no dedicated home equity sharing statute, so the first job is confirming who you are dealing with and under what law.

• Verify the company before the offer: Look the provider up in NMLS Consumer Access and check its status with the Michigan Department of Insurance and Financial Services. Then ask in writing whether your agreement is a credit transaction carrying federal Truth in Lending disclosures or an equity investment that is not. The answer decides which protections apply.
• The transfer tax follows the sale price, not your net: Michigan’s state and county real estate transfer tax runs $8.60 per $1,000 of sale price, $3.75 per $500 to the state plus 55 cents per $500 to the county, and the seller owes it. On a $520,000 sale that is $4,472, calculated before the investor’s share comes out.
• MSHDA will not help here: MSHDA down payment assistance is a second-lien loan layered onto a MSHDA first mortgage at purchase. It is a tool for buying, not for pulling equity out of a home you already own.
• A broker can price the alternatives side by side: Align shops conventional equity options across multiple wholesale lenders, and a written HELOC or cash-out quote gives you what an equity sharing offer cannot: a number you can compare. Start with how a HELOC works.

How do Michigan rules and prices change the math?

Does any Michigan law written for these agreements protect you?

Not yet. Michigan was not among the states with laws aimed at these contracts as of April 30, 2026, per Mayer Brown, so nothing in Michigan law requires a provider to hand you Connecticut-style repayment scenarios or Maine’s counseling certificate. If the provider holds a Michigan mortgage or consumer finance license, the state department named in “What Michigan homeowners should know” above is where that license is checked.

What would Michigan’s recent price gains mean for the investor’s share?

Michigan prices have kept climbing, which is what makes a share-of-value contract expensive. Michigan’s purchase-only house price index rose 3.80% over the year ending in the second quarter of 2026 and 38.80% over five years, according to the Federal Housing Finance Agency’s 2026Q2 House Price Index report, released August 25, 2026. The same report shows Detroit-Dearborn-Livonia up 4.90% over the year, Warren-Troy-Farmington Hills up 3.26% and Grand Rapids-Wyoming-Kentwood up 3.18%. Michigan sits in the East North Central division (Census Bureau regions and divisions), which posted 4.46% over the same year.

Hypothetical example, not an offer. If the $400,000 home in the cost table gained the five-year Michigan rise of 38.80% (FHFA) and the agreement settled after five years at that pace, not the table’s 10, the home would be worth $555,200. Under Structure A, 25% of value, the investor would collect $138,800 for the $40,000 advance. Under Structure B, the $40,000 back plus 40% of the $155,200 gain, it would collect $102,080. A statewide index does not predict one home’s value, and real estate appreciation varies by street and house, so treat this as arithmetic, not a forecast.

FAQ: Home equity sharing agreements

Here are answers to common questions about home equity sharing agreements.

How is a home equity sharing agreement different from a home equity loan?

A home equity loan is debt: you borrow a fixed amount at a stated rate, repay it monthly, and can total the cost before you sign. An equity sharing agreement is an investment: you take cash with no monthly payment and settle later by handing over a share of your home’s value, so the cost stays unknowable until the end. See home equity loans, pros and cons.

What happens if my home loses value?

It depends entirely on your contract. Some agreements share the downside and cut what you owe. Others take a percentage of value regardless, so a home that falls 10% can still owe the investor more than twice the original advance. Get a written illustration at declining, flat and rising values first, and read using home equity wisely.

Can I end a home equity sharing agreement early?

Usually yes, through a buyout, a refinance that pays the investor off, or a sale. Many contracts add an exit fee or a minimum holding period in the first year or two, and a buyout typically requires a fresh appraisal at your expense. Confirm whether the provider will subordinate to a new first mortgage, since a cash-out refinance is a common exit route.

Who typically qualifies for a home equity sharing agreement?

Providers generally look for substantial existing equity, an owner-occupied home in a market they serve, and a credit minimum below what a HELOC would require. Income documentation is lighter because there is no payment to underwrite. Availability is limited by state and property type, so price a HELOC before you decide.

Can I refinance into a Fannie Mae loan with a home equity agreement still in place?

Usually not. Fannie Mae’s Selling Guide (B2-1.2-04, dated August 6, 2025) says that unless it qualifies as a Community Seconds loan, an agreement obligating the borrower to pay a third party other than a co-owner a share of the home’s appreciation is not permitted. In practice, a refinance into a loan sold to Fannie Mae means paying the investor off at closing, so get the buyout figure before you apply.

Is a home equity agreement the same as a reverse mortgage?

No. The most common reverse mortgage, the Home Equity Conversion Mortgage, is insured by the Federal Housing Administration, is only for homeowners 62 and older, and adds interest and fees to its balance each month, according to the CFPB. The bureau lists three types: FHA-insured, proprietary loans that are not FHA-insured, and single-purpose loans from state and local governments. See how reverse mortgages work.

What happens to a home equity agreement if the homeowner dies?

Death is typically a settlement event. Connecticut law defines these agreements as an advance repaid when an event such as an ownership transfer, the maturity date or the borrower’s death occurs, according to a June 29, 2026 legislative research report. That leaves heirs to pay the provider’s share, usually from a sale or new financing, so name the agreement in your estate plan.

How common are home equity agreements?

Still rare next to HELOCs. In the first 10 months of 2024, the four largest home equity contract companies securitized about $1.1 billion backed by about 11,000 contracts, against 1.2 million HELOCs originated in the four quarters ending in the second quarter of 2024, according to the CFPB. The bureau calls the contracts a niche product.

How much do home equity agreements charge up front?

Processing fees are often 3% to 5% of the initial payment, according to the CFPB, and the bureau’s own worked example added a 4% transaction fee plus $2,000 in third-party fees. Fees are usually taken out of the cash you receive, so the check is smaller than the advance the settlement formula is based on.

The bottom line on home equity sharing agreements

A home equity sharing agreement pays you a lump sum today for a percentage of your home’s value later, with no monthly payment and no interest rate. That is the appeal and the trap: a $40,000 advance against a $400,000 home can settle at $130,000 if the home reaches $520,000, and under a percentage-of-value structure it still settles near $90,000 even if the home loses value. The clause deciding whether the investor takes a share of value or only a share of appreciation is worth more than every other term combined. Read it, price it at 3 future values, and put those numbers beside a real loan quote.

If you’re ready to see what tapping your equity would actually cost, talk to Align Lending. We’ll shop your scenario across our lender network and show you HELOC, home equity loan and cash-out numbers side by side. Call 248-506-5727 or start online.

Footnotes:

1. Example figures in this article are hypothetical and for educational purposes only. They do not constitute an advertisement of credit terms, an offer, or a rate quote under federal or state lending laws, and the implied annual cost figures shown are arithmetic illustrations, not APRs. Advance amounts, settlement percentages, valuation methods and term lengths are set by each provider’s contract and will differ from the illustrations here. Return to text.

2. This is general information, not tax advice. How a home equity sharing agreement is characterized for federal and state tax purposes depends on how it is structured and on your individual circumstances, including whether you itemize. Consult a qualified tax professional about your situation before signing. Return to text.

3. Home equity sharing agreements are private investor products, not government or agency loan programs. No federal agency publishes eligibility standards, maximum advance amounts, settlement formulas or term lengths for them. Any figures described here reflect how these contracts are commonly structured, not a rule that binds any provider. Align Lending does not originate home equity sharing agreements; confirm all terms directly with the provider and in the signed contract. Return to text.

Sources: definition of a shared appreciation mortgage (“you agree to give your lender a share of any increase in the value of your home”), definition of home equity (“the amount your property is currently worth minus the amount of any existing mortgage on your property”), and definitions of a home equity loan and a home equity line of credit including variable rates, the draw period and foreclosure risk, Consumer Financial Protection Bureau, Mortgage Key Terms and Ask CFPB. Comparing loan offers and the home-buying decision sequence, Consumer Financial Protection Bureau, Owning a Home. Cash-out refinance requirement that at least one borrower be on title for at least six months prior to the disbursement date, and that the existing first mortgage be at least 12 months old measured note date to note date, Fannie Mae Selling Guide B2-1.3-03. Deductibility of home equity interest only where proceeds buy, build or substantially improve the home securing the loan, and the $750,000 and $375,000 qualified-residence-debt limits for debt incurred after December 15, 2017, IRS Publication 936 (2025) and IRS news release IR-2018-32. Capital gain exclusion of up to $250,000 filing single and $500,000 filing jointly, with ownership and use of the home for at least 24 months of the five years before the sale, IRS Topic No. 701. HUD-approved housing counseling agencies and HUD-certified housing counselors, U.S. Department of Housing and Urban Development, Housing Counseling (800-569-4287). Michigan state real estate transfer tax of $3.75 per $500 of value and seller liability, MCL 207.525 and MCL 207.523. Michigan county real estate transfer tax of 55 cents per $500 of value in a county with a population under 2,000,000, and not more than 75 cents per $500 as authorized by the county board in a county of 2,000,000 or more (no Michigan county currently exceeds that threshold), MCL 207.504.

Figures current as of August 2026; verify with the linked source. Tax limits, exclusion amounts, agency guidelines and state transfer tax rates change, confirm current figures with the IRS, the Fannie Mae Selling Guide and Michigan statute before relying on them.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Home equity sharing agreements are contracts written by private investors; their terms, costs, availability and consumer protections vary by provider and by state, and nothing here describes the terms of any specific offer. Figures shown are illustrative, are not a rate quote or an offer of credit, and are subject to change. Consult a qualified attorney and tax professional about your situation. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.

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