You own a home and need some extra money. Maybe it’s the new roof you’ve been putting off, debt slowly draining you dry or college tuition staring you down. You’re stressed. Then you hear the pitch:
Tap into your home’s equity. No credit check. No monthly payments. No income requirements. Get the cash you need today.
That’s the promise behind Home Equity Investments, also known as shared equity agreements.
But here’s what many homeowners don’t fully realize: this can become a more expensive way to access your home equity, depending on how home values change.
Home Equity Investments can make sense in certain situations, particularly when borrowers cannot qualify for traditional financing, but they carry trade-offs that are important to understand.
Like any financial product, the right option depends on your goals, credit profile and long-term plans.
What Is a Home Equity Investment (HEI)?
A Home Equity Investment, or HEI, isn’t a loan. You receive cash today by agreeing to give an investor a share of your home’s future value.
There are usually no monthly payments, which can sound appealing at first. Agreements often last 10 to 30 years, and repayment happens later as a lump sum when you sell, refinance, or the agreement expires.
The tradeoff is uncertainty. You don’t know the final payoff because it depends on your home’s future value and the terms of the agreement. And unlike a traditional loan, you usually can’t pay the balance down gradually over time. The amount owed grows quietly in the background until the agreement ends.
In many agreements, the share owed later can also be larger than the percentage of value you receive today. For example, receiving cash equal to about 10% of your home’s value now could mean repaying closer to 20% of its value later, depending on contract terms and how home prices change.
The Risks Many Homeowners Don’t See Coming
If the company values your home below what it could sell for on the open market, you may already be giving up a larger share of future gains. In some agreements, if home values decline, the investor’s share may increase to protect their return, shifting more risk to the homeowner. When prices rise, investors benefit. When prices fall, they may still be protected.
Because HEIs push most of the cost to the end of the agreement, some homeowners experience what’s often called settlement shock, when appreciation makes the final payoff far larger than expected.
Repayment can also come with practical challenges. If home values fall or lending conditions tighten when the agreement matures, refinancing may become difficult or even impossible. In some cases, equity investments can affect refinancing options if they create a priority lien on the property, limiting access to financing when needed.
When repayment comes due, some homeowners find their only realistic option is to refinance if they qualify, or to sell the home to satisfy the agreement.
Real Costs, Side by Side
When homeowners tap into their equity, they usually consider two familiar options: a Home Equity Loan or a HELOC.
A Home Equity Loan provides cash upfront with fixed monthly payments, so you know exactly what you owe and when it will be paid off. In some cases, interest paid on home equity borrowing used for qualifying home improvements may also be tax-deductible. A tax advisor can help determine eligibility.
A Home Equity Line of Credit (HELOC) offers flexibility, allowing you to borrow as needed and pay interest only on what you use. However, payments may increase over time as rates or balances change, and tax deductibility depends on how funds are used and current tax rules.
Home Equity Investments (HEIs) offer another path, providing cash today in exchange for a share of the home’s future value.
To illustrate how these options compare, consider a hypothetical homeowner with a $750,000 home who accesses $75,000 in equity. Assuming rates remain near recent national averages and home values grow about 4% annually, the example below shows how each option could look over 10 years. Actual costs, rates and home values will vary.
This example is for educational comparison purposes only and does not represent a specific provider or guarantee of future results.
Here’s what that decision might look like 10 years later.
| Home Equity Loan1 | HELOC2 | Home Equity Investment3 |
| Home value today | $750,000 | $750,000 | $750,000 |
| Equity accessed | $75,000 | Up to $75,000 | $75,000 |
| Upfront fees | Often low or none4 | Often low or none4 | ~$4,700 |
| Net cash received at funding | ~$75,000 | As drawn | ~$70,000 |
| Monthly payments | Fixed | Variable | None |
| Final payoff known upfront? | Yes | Mostly | No |
| Estimated home value in 10 years | ~$1.11M | ~$1.11M | ~$1.11M |
| Estimated total cash repaid | ~$111,600 | ~$135,000 | ~$222,000 |
| Total borrowing cost | ~$31,800 | ~$60,000 | ~$152,000 |
Notes & Assumptions ¹ Home Equity Loan example assumes a $75,000 loan at 8.5% with a 10-year repayment term. Making extra principal payments can reduce total interest costs. ² HELOC example assumes a $75,000 balance at approximately 8% APR with interest-only payments during a 10-year draw period, with the outstanding principal due in full at the end of the period. Actual costs vary based on rate, balance and repayment timing. ³ HEI example assumes the investor receives 20% of the home’s future value after providing funds equal to about 10% of the home’s current value. Contract terms and outcomes vary by provider and agreement. 4 Frontwave currently offers Home Equity Loans and HELOCs with no lender fees; third-party costs may still apply depending on transaction details. |
Hidden Risks You Can’t Ignore
HEIs may feel easier up front, but the trade-offs can be significant. Instead of simply borrowing, you’re giving up a share of your home’s future value, and the true cost often isn’t clear until settlement.
If you sell your home, the investor receives their agreed share from the proceeds. If you plan to stay, you’ll likely need to refinance or use other funds to buy back that share when the agreement matures.
Some HEI agreements can also affect your ability to refinance, rent out the property, or make certain changes without approval. Terms vary, so it’s important to understand how an agreement could impact your options later.
We know situations can be challenging when you’re facing limited credit, fixed income, medical bills, or urgent expenses. If an HEI feels like the only option, take time to understand the full cost and what you’re giving up, and consider talking with a trusted financial advisor before moving forward.
Better, Smarter Ways to Tap Your Equity
If you need access to your home’s equity, traditional options may help you unlock cash while keeping future home value in your hands.
A home equity loan provides a lump sum with fixed payments, so you know exactly what you owe.
A HELOC offers flexibility, allowing you to borrow what you need and pay interest only on what you use. Use our HELOC Payment Calculator to estimate monthly payments and see how different balances, rates and repayment terms could affect your budget.
A cash-out refinance replaces your existing mortgage and may provide cash while potentially adjusting your interest rate and loan term.
These options are governed by established lending regulations and structured repayment terms, so you maintain full ownership of your home while repaying what you borrow over time.
Final Take: Don’t Give Away What You’ve Built
Your home is more than just a place to live. For many families, it’s one of the biggest financial assets they’ll ever build. An HEI may seem simple upfront, but the long-term cost can grow quietly over time, especially if your home value increases.
With a traditional home equity loan or HELOC, you borrow against your equity while keeping future appreciation in your hands. Once the balance is repaid, that equity is still yours.
Before signing an HEI agreement, ask yourself: Is the convenience today worth giving up part of your home’s future value tomorrow?
If you’re weighing your options, connect with a Frontwave Home Loan Consultant to walk through the numbers, compare solutions and understand what makes the most sense for your goals. You can also explore calculators, tools and homeownership resources in our Mortgage Resource Center.
