What is the difference between a home equity investment and a HELOC?

A HELOC is a line of credit you borrow against and repay with interest through monthly payments. A home equity investment gives you a lump sum now in exchange for a share of your home's future value, with no monthly payments and one settlement at the end. The difference comes down to what sets your cost: an interest rate on a balance, or what your home is worth on the day you settle.

A home equity investment (HEI) is a contract in which a company pays you cash today and receives a share of your home's value or appreciation when the agreement ends. The same product is also sold as a home equity agreement, home equity contract or shared appreciation agreement.

How does a home equity investment work?

You receive a single cash payment based on your equity. You make no monthly payments and pay no interest. When you sell, refinance, buy the provider out or reach the end of the term, you pay the provider an agreed share of the home's value. A lien on your home secures that obligation until you settle.

The CFPB's January 2025 market overview describes the structure plainly. Terms usually run 10 to 30 years. The homeowner keeps the exclusive right to live in the home and stays responsible for property taxes, hazard insurance and any other debt secured by the home. Processing fees often run 3% to 5% of the upfront payment.

Providers price the share in different ways. Unlock and Point publish two of them.

• Unlock's product guide takes a share of total value. It multiplies the percentage of value you receive by an exchange rate, typically 1.8. Take $100,000 on a $1,000,000 home and Unlock's percentage becomes 10% × 1.8 = 18% of the home's ending value. The term is 10 years.
• Point takes a share of appreciation above a starting value. It repays its investment plus a portion of appreciation above an "appreciation starting value," set below the appraised value. Its term is 30 years. If the home falls below that starting value, Point shares the loss.

Hometap, a third provider, has a 10-year term. Most providers also apply an annual cost cap. Unlock's is typically 19.9% per year, and it binds mainly when you settle in the first few years.

How does a HELOC work?

A HELOC is a revolving line of credit secured by your home. You draw what you need during a draw period, pay interest on what you owe, and then repay the balance over a set repayment period. The rate is usually variable, so payments can change.

The CFPB's HELOC explainer gives a draw period of 10 years as an example. After that, many lenders require repayment over 10 or 20 years, and payments often rise when the draw period ends. Some plans let you convert part of the balance to a fixed rate. If you fall behind, the CFPB warns you could lose your home. Lenders can also freeze or reduce the line if your home's value drops sharply.

Your HELOC cost depends on how much you draw, for how long and at what rate. Your home's future price does not change what you owe.

How do a home equity investment and a HELOC compare?

A HELOC has a monthly payment, and its cost is interest on what you draw. A home equity investment has no monthly payment, and its cost is a share of your home's value at settlement. Both put a lien on your title.

Criterion	Home equity investment	HELOC
Monthly payment	None	Yes, usually interest during the draw period, then principal and interest
How cost is determined	A share of the home's value or appreciation at settlement, plus fees	Interest on the balance you draw, usually at a variable rate, plus fees
Term	Commonly 10 to 30 years (Unlock 10, Hometap 10, Point 30)	Draw period often around 10 years, then repayment over 10 or 20 years
Qualification	Equity-driven. Unlock and Point publish a 500 minimum credit score and no income requirement. Aaron's program: no income documentation, no appraisal required, FICO as low as 500 considered, up to 75% LTV	Credit, income and debt-to-income review. The HELOC programs Aaron advertises start at a 640 credit score
What you give up	A share of your home's future value, and a lien on title	Monthly cash flow for payments, and a lien on title
When it ends	Sale, refinance, buyout, term end, death of the last owner, or uncured default	Balance repaid over the repayment period, or paid off at sale or refinance
Availability in Aaron's states	Up to $600,000 in AZ, CA, FL, ID, OH, OR, PA, TN, VA, WA, WY	In the states where Aaron is licensed, subject to lender program availability

Lender and provider guidelines vary, and approval for either product is subject to underwriting.

How does home appreciation change the cost of a home equity investment?

The more your home gains in value, the more you repay. With a HELOC, a rising home price leaves your balance unchanged. With an HEI, the provider's share grows with the home, so strong appreciation can make it the more expensive option by a wide margin.

The table below is a hypothetical illustration, not an offer or a quote. It uses the share-of-total-value structure from Unlock's public guide: a $600,000 home, a $60,000 payment (10% of value), an 18% provider share, settled at the end of a 10-year term. It ignores fees, adjustments for improvements and any cost cap.

Scenario (10 years)	Home value at settlement	Provider share (18%)	Paid back above the $60,000 received	Settlement as a multiple of cash received
Flat, 0% per year	$600,000	$108,000	$48,000	1.8x
Moderate, 3% per year	about $806,400	about $145,100	about $85,100	about 2.4x
Strong, 6% per year	about $1,074,500	about $193,400	about $133,400	about 3.2x

Even with a flat price, this structure returns 1.8 times the cash because of the exchange rate. Each step up in appreciation adds tens of thousands of dollars to the settlement. And a change-based structure like Point's would produce different numbers, because only appreciation above the starting value is shared.

The CFPB ran its own comparison against a mainstream $50,000 HELOC. It found the home equity contract was more expensive overall than the HELOC if the home appreciates, and in its strongest appreciation scenarios the contract cost more than twice as much. The same report found settlement amounts under many contracts grow 19.5% to 22% per year in the early years, before caps.

Short holds are where caps matter. In Unlock's own example, a $60,000 payment settled after 1 year is capped at $71,940 instead of an uncapped $111,240.

What are the risks of a home equity investment?

The main risk is a large single payment that you cannot predict at signing. Other risks are the lien, which can complicate refinancing, and contract terms that differ from provider to provider. You need a clear plan for how you will settle.

The CFPB flagged several issues in its 2025 report:

• The full settlement comes due at once. Homeowners who cannot pay it may need to sell. Early payoff is generally allowed only in full, though Unlock permits partial buyouts with its approval.
• The provider's lien can limit your ability to refinance your first mortgage or take on new debt.
• A company may set the starting home value 25% below the appraised value, which tilts the math toward the provider.
• Disclosures are hard to compare. Each company uses its own method, so side-by-side comparison takes work. The CFPB reviewed 38 complaints, and 6 of the 21 with published narratives called the products "predatory."

State regulators are watching too. Washington's Department of Financial Institutions opened an inquiry on May 1, 2024, collected responses from 9 providers, and reported on September 12, 2024 that home equity sharing agreements show "many similarities" to traditional loan products.

Before you sign, read the settlement terms closely. Look for the exchange rate or share percentage, the starting value, the cost cap, what triggers settlement, and how improvements you make are credited.

When does a home equity investment make more sense than a HELOC?

An HEI can fit when you need cash without a monthly payment and expect to sell or refinance within the term. A HELOC fits better if you qualify on credit and income and can carry the payment, since your cost then depends on what you borrow rather than on your home's price.

Four questions sort most cases.

1. Can you carry a monthly payment comfortably? If yes, a HELOC keeps more of your future equity with you.
2. How long will you hold the money? Settling within a few years can trigger the cost cap. A long hold in a rising market can push an HEI settlement well above HELOC interest.
3. Do you qualify for a HELOC? If income documentation or credit history rules a HELOC out, an HEI may still be available, since many providers weigh equity more than income.
4. What is your exit? Know whether you plan to sell, refinance or buy the provider out, and when.

How Aaron approaches this

Aaron Ehresmann is a Loan Originator at West Capital Lending, individual NMLS #2099240, company NMLS #1566096. He has access to 90+ lenders and shops your scenario across them rather than offering one in-house product. His HEI program is available in AZ, CA, FL, ID, OH, OR, PA, TN, VA, WA and WY, and the HELOC programs he advertises start at a 640 credit score. He holds a 4.98 average from 127 reviews across Experience.com, Google and Zillow.

To see whether a home equity investment fits your plans, start at the HEI program page.