Home Equity Agreement: What Is It?

Your home’s equity is one of the most powerful financial tools at your disposal. But what if you don’t have good enough credit for a home equity loan or home equity line of credit? In this case, you might still qualify for a home equity agreement.

What if you’re not sure what a home equity agreement is or how to use it? Read on to learn more about these unique financial strategies.

What Are Home Equity Agreements?

Put very simply, a home equity sharing agreement means that an investor takes out a minority ownership stake in your property based on the property value. For example, if you’ve built up to 50% equity in your property, you can find an investor to invest in 20% of that equity. 

Why do companies do this?

In short, it's because they expect your property's equity or value to appreciate and become even more valuable over time. In a home equity agreement, the investor gets to take home the profits from that equity since you'll pay them back for the equity they originally "purchased."

Compared to other options, like a cash-out refinance, a home equity investment enables you to dip into the value of your home for:

  • Home improvements and home renovations
  • Increase your cash flow and pad your savings
  • Pay off credit card debt or debt from other loans to improve your overall financial situation

However, a home equity agreement is highly dependent on the fair market value of your property. It’s a flexible real estate tool, but home appreciation can affect just how much money you may receive from an investor or mortgage lender.

How Does a Home Equity Agreement Work?

A home equity agreement usually works like this:

  • You ask a home equity-sharing investment company for a prequalification estimate, which tells you how much cash you might receive in exchange for a portion of the future value of your property.
  • The home equity sharing company will determine an approved starting home value through market analysis and internal systems or they will order an appraisal to determine your property’s real market value.
  • If you qualify for a home equity agreement, the company will pay you a lump sum for the equity they invest in. The company then technically owns a portion of your home, but the company doesn’t have any occupancy rights.
  • Rather than paying interest, you instead agree to give the investment company a percentage of the future equity appreciation in your property. Depending on the investment company and their agreement, you may not be required to make any monthly payments.
  • At the end of the home equity sharing agreement term or when you decide to sell your house, you pay the investment company back for the equity they’ve invested in at the current market value. In this way, the company makes a profit. Meanwhile, you get immediate access to cash through your home’s equity.

This is the best way to understand a home equity agreement. It’s a tool for you to get cash for a share of your home equity.

Like other refinancing tools, such as reverse mortgages and similar financial products, you need to understand how this hometap works. If you already have a personal loan or a high-interest mortgage loan for your existing mortgage, home equity products like this may not be ideal for your financial goals.

Home Equity Agreements With Balance

Balance offers a unique home equity agreement through co-ownership.

Balance invests in your home in exchange for an ownership interest in the home — your mortgage will be replaced by an equity investment from us, and you’ll make a monthly payment to us to cover your occupancy of the home as well as your share of insurance and taxes.

In the meantime, you can use the financial wiggle room to pay off debts, save up, and make necessary repairs to your home. Co-owning with Balance can provide you with the flexibility you need to keep your home without compromising your credit.

In the future, you can save up enough money to buy us out and refinance into a traditional mortgage.

If no other options are suitable for your situation, co-owning with Balance may be the ideal way to access your home’s equity.

What Are the Benefits of a Home Equity Agreement With Balance?

Co-owning with Balance has some major advantages for homeowners. These benefits include:

  • You’ll only make one simplified monthly payment directly to us.
  • It's easier to qualify for Balance’s homeownership program compared to a home equity loan or home equity line of credit. Our homeownership program has no minimum credit score, and instead qualifies mainly on a homeowner's income and equity.
  • You get access to a lump sum of home equity-derived cash, which you can use to make home repairs, strengthen your financial profile, or pay off debt.

Contact Balance Today

With Balance, you get to stay in your home — and you gain financial freedom and flexibility to help you pay down other debts. Best of all, you can always buy us out and purchase the equity we invest in later on. Contact us today to learn more.


Home Equity: What It Is, How It Works, and How You Can Use It | Investopedia

What Is a Home Equity Sharing Agreement? | NerdWallet

Understanding your home's equity | Freddie Mac

What is a home equity line of credit (HELOC)? | Bank of America