Home Equity Share Agreements Explained

Home equity share agreements provide an alternative for homeowners to access funds without traditional borrowing methods. Instead of taking out a loan against their property, homeowners can receive a cash payment in exchange for a share of the future appreciation of their home. For example, if a homeowner with a $500,000 house borrows $50,000 through a home equity investment, they may give up 20% of the home's future value instead of making monthly payments. This option can be appealing in a rising market; however, it poses risks if home values decline, as these agreements usually require a portion of the home's value upon settlement, regardless of market conditions.