Home Equity Agreements

When looking to tap into your home’s equity, you’re left with only a few options.

1) Refinance your first mortgage (which probably has a 2%, 3 or even a 4% in front of it and makes no sense to do.

2) Pull out a line-of-credit (HELOC) and make sure the monthly payment on it fits your needs & goals.

3) is a new one - a “Home Equity Agreement”.

For a month now I have been getting asked by clients and realtors alike - “do you know how these work”? Not until recently did I do some digging and what I found out was pretty shocking. These programs allow you to pull cash out of your home’s equity with no monthly payment required and no interest accruing. Sounds amazing right!? WRONG.

Most of the HEA offers are starting around 10% - 15% of your equity…!

These companies will take anywhere from 5% up to 25% of your home’s value when you sell. Most of the quote’s I’ve seen are starting around 10% - 15%… Let me do some quick math on this for you.

Your home is worth $600,000 today and you only need $30,000 cash out. If you took that offer today and sold your home tomorrow, at an 11% equity agreement you would be paying them $66,000…! Again, keep in mind, this is based off of your home’s value upon time of sale. If you stay in your home another 5 years and sell at $700,000, the 11% equity agreement now went up to $77,000.

Although these tech companies appear to make real estate and financing sound easy, it always comes with a huge catch.

Be careful, the devil is always in the details.