Home Equity Sharing: 7 Advantages and Drawbacks

As a homeowner, the equity you’ve built up in your property doesn’t have to just sit there. You can make your equity work and improve your finances by selling a portion of your home equity for cash with a company like Balance

But what exactly is home equity sharing, and how does it typically work? Today, let’s look at the advantages and drawbacks of home equity sharing in detail.

What Is Home Equity Sharing?

Home equity sharing is a new way to take advantage of your home value without worrying about an interest rate, down payment, origination fee, minimum credit score requirements, home equity loans, or HELOCs. 

When you participate in home equity sharing, you’ll partner with an investment company or individual investor by selling a portion of your home's existing equity for cash. While you receive a lump sum payment for your equity, the investor gets to share pro-rata in the home’s future value with you. 

In a sense, you’ll be selling a piece of your home’s equity like company owners sell percentages of a company’s total stock to raise cash. Investors aim to purchase the equity at a slight discount while hoping that the value of the equity will increase over time. 

For their part in the program, homeowners may participate in equity-sharing agreements to raise cash quickly. For example, if you have built up 20 years of equity in your property and need money to pay for a home improvement, a significant debt, or a medical bill, then selling your equity to an equity investor could be a wise financial strategy. 

Some savvy homebuyers and borrowers may even leverage the value of the home they currently own to obtain home loans with better mortgage rates for a new property.

With a home equity investment, you can unlock the value of your home. By working together with other investors, you can get the financial wiggle room you need to get caught up and achieve your goals. 

What Are the Benefits of Home Equity Sharing?

There are many general advantages to home equity sharing which make them attractive to homeowners and investors alike. 

Here’s a breakdown of these benefits:

  1. Unlike mortgage lenders, the investment company shares in both the gains and losses in your home’s equity, so they’re truly your partners as they have a vested interest in ensuring your property does well.
  2. It’s easier to qualify for equity-sharing agreements than home equity lines of credit, traditional mortgages, and other financial products, and there is no cash required to move forward.
  3. Some investment companies may buy equity in your home even if your credit score is low. Balance Homes has no minimum credit score, making it even easier for you to get back on track.
  4. Home equity sharing doesn’t add more debt to your credit report, giving you the opportunity to pay off high-interest debt.

A home equity sharing agreement could be a great option to access much needed cash without needing perfect credit.

What Are the Drawbacks of Home Equity Sharing?

Remember that there can also be potential downsides to home equity sharing in some cases.  

In general, some possible issues include:

  1. The overall cost of home equity sharing is not known due to a dependence on the future fair market value at exit.
  2. You won’t be able to rent out your home or use it as collateral for other home equity loans.
  3. You can only take out an equity-sharing agreement in a certain number of states.

It's important to understand the terms of the home equity agreement and ensure they align with your goals. 

How Does Home Equity Sharing With Balance Work?

Above all else, you should choose a home equity investor that will work with you and help you achieve your financial goals. Balance has been that investor for many homeowners in the past. 

With Balance, we’ll replace your existing mortgage with an equity investment — not only does this pay off your mortgage, but it also gives you access to additional cash in the form of a lump sum.

We’ll share in your home's appreciation, depreciation, and costs, and you retain ownership and stay in the home you love. You’ll pay a simple monthly payment directly to us for your occupancy and share of taxes and insurance, and we’ll contribute towards shared costs too, as a co-owner.

What Are the Benefits of Co-Investing With Balance?

Compared to conventional home equity sharing, Balance offers a few key advantages. With our co-investing approach, there’s no minimum term — meaning you have maximum flexibility. That means you can choose to buy Balance out at any point if you’re ready to refinance into a traditional mortgage. 

Many home equity investors don’t allow you to buy them out early, or they may charge excessive fees. With Balance, you won’t be penalized for leaving early. In fact, we encourage you to buy us out once you’ve built up your credit and savings.

Not only that, but we aim to streamline the monthly payments you have to make toward your property. By purchasing your mortgage from your current lender, we take that financial burden off your shoulders and replace it with a monthly payment that covers your occupancy fee and share of the monthly expenses.

Unlike conventional co-investing, Balance caters to homeowners with less-than-perfect credit. Our homeownership program offers a more accommodating approach to homeownership during financial challenges and tough times, and gives you the opportunity to work toward financial stability, improve your overall financial profile, consolidate debts, and improve your credit score. 

Contact Balance Today

Home equity sharing could be a great way to get some extra cash, minimize your monthly payments, and achieve greater financial stability than you had before. 

If you have existing home equity and want to bring on an investment partner, you can share your home equity with Balance starting today. We’ll make it easy to pay your debts and rebuild your credit score while leaving the option to buy us out of our share later.  

Contact us today to learn more.


Understanding your home's equity | Freddie Mac

What Is a Home Equity Sharing Agreement? | ConsumerAffairs

Equity Sharing Lets Homeowners Sell 'a Slice' of Their House. Should They? | Money.com

Sharing a portion of your home's future appreciation can help you raise cash now with no monthly payments | Business Insider