Home Equity Sharing: Pros and Cons

One of the primary advantages homeowners have over renters is the ability to tap into their home equity. This equity can be accessed through several different loan products that pay out a lump sum or provide the borrower with a line of credit in exchange for a portion of their equity. While most home equity products involve monthly payments with interest, home equity sharing agreements don’t.

An equity sharing agreement is an arrangement that allows the homeowner to access their home equity without technically taking on debt. When you engage in home equity sharing, you’re essentially exchanging a lump sum of money for a percentage of your home’s future value. Home equity sharing agreements are repaid at the end of a set time period or when the borrower sells the house.

Homeowners are holding a record amount of equity in 2025. For those looking into accessing their home’s value without taking on extra monthly payments, an equity sharing agreement could be an alternative. However, these arrangements are far from risk-free. Let’s take a look at these agreements and their most significant pros and cons.

What is a shared equity agreement?

Home equity sharing companies purchase a portion of your home in exchange for a lump sum payment, plus a share of the future appreciation in your home equity. These agreements are very similar to how you invest in the stock market.

The investor buys “stock” (in this case, home equity) in the hope that the home’s future value will increase. When the agreement's term is up or the home is sold, the investor recovers their original investment plus a percentage of any gains in the value of the home. On the other hand, if the property loses value, the investor also loses.

A big part of the attraction of home equity investing is that you won’t have to make monthly payments or pay an interest rate on the amount you receive. Instead, you’re delaying the repayment until the end of the equity sharing agreement’s term or when you sell your home or refinance your home, whichever takes place first. You can think of an equity sharing agreement as a type of balloon payment loan.

According to Jon MacKinnon, senior vice president of product strategy and business development at home equity investment company Hometap, this product is quite compelling for many homeowners, since it allows them to "address their financial goals [and] solve their short- and longer-term goals without meaningfully impacting their monthly budgets."

The pros of home equity sharing

No monthly payments

The most enticing upside to signing a home equity sharing agreement is that you won't need to worry about the product’s debt cutting into your monthly budget anytime soon. Unlike traditional home equity loans or lines of credit, you won’t need to pay back the money owed in monthly installments, but rather as a lump sum at the end of the agreement.

Loan amounts can be large, and you can use the money for any purpose

How much money you can obtain from a co-investing company will depend on your home’s value and how much future equity you’re willing to sell. Different companies have minimum and maximum amounts they are willing to invest, which can range from $15,000 to $600,000 or more. Additionally, there are no limits on what you can use the money on.

The investment company shares in the gain, as well as the loss, of equity in your home

Technically, you could repay less than you initially borrowed if your house drastically lowers in value beyond the investment company's initial risk assessment. In this scenario, you would gain more value out of your home equity than you would eventually have to pay back. However, the fact that the company can, to a degree, control what changes you make to your home and that home values have been continuously rising makes this an unlikely outcome.

The cons of home equity sharing

You could owe more money than you received

In a home equity sharing agreement, the company you are in business with will start by getting an appraisal to determine your home’s value and how much equity you currently own. Once the assessment is in, the company will do a risk adjustment to that value — basically, a downward adjustment to offset the risk of a future loss of equity. This adjustment can range from a low of 2.75% up to 20% of the appraisal, depending on the company. This adjusted value, not the full appraisal value, determines the amount you'll receive upfront and will play a part in how much you’ll have to repay.

There may be restrictions on when you can sell your home, make improvements or buy back the agreement

Because you are entering a legal agreement with a company over the future value of your home, your agreement may include limitations on what alterations you can make to the property that could potentially devalue it. Some companies can also limit your ability to opt out of the agreement before the term ends or charge you penalties if you sell your home prematurely.

You may need to sell your home to repay the investment

At the end of the agreed-upon contract period, you will need to make a lump sum payment of the amount you borrowed plus a percentage of any equity gained. You may be able to pay this sum before the end of the agreement term if you decide to buy out the contract or sell your home. For most homeowners, however, reaching the end of the contract will mean selling their home, refinancing or finding another source of funding to repay the investment.

How does a home equity sharing agreement work?

How much money you can obtain from an equity sharing agreement depends on your home's appraised value, the risk assessment and the percentage of equity the investor buys.

For example, say your home appraises at $500,000. The company you choose as a co-investor makes a risk adjustment of 10%, bringing your home’s value down to $450,000. If you decide to sell 10% of your home’s future equity in exchange for a $50,000 payment, the math works out as follows:

Original adjusted home value: $450,000

Value at time of repayment: $600,000

Total appreciation: $150,000

You would have to repay $65,000 (the original $50,000 plus 10% of the total appreciation = $15,000).

On the other hand, if your home's value decreases by $100,000 at the time of repayment, you would owe less money:

Original adjusted home value: $450,000

Value at time of repayment: $350,000

Total depreciation: $100,000

You would owe $40,000 (the original $50,000 minus 10% of the total depreciation = $10,000).

Summary of Money’s home equity sharing: pros and cons

Home equity sharing is a relatively new home equity product for homeowners who may not want to take on new debt, can’t meet the standards of a traditional home equity loan or are looking to borrow money without making monthly payments. The product does incur some risks, however, as you will need to pay back the amount borrowed plus a percentage of the equity gained at the end of the contract period. Weigh your options and speak with a financial advisor before deciding if a home equity sharing agreement is right for you.