Turn Your Home Equity Into a Down Payment for Your Next Property — No Loan Needed
Use a Home Equity Investment to turn your existing equity into cash for a down payment on a second home, rental, or investment property. No Monthly Payments, No Loan, No Income Verification
Home Equity Investment vs Traditional Home Equity Loan
| Feature | Home Equity Investment | Traditional Home Equity Loan |
|---|---|---|
No Monthly Payments | ||
Flexible Credit Requirement (500+) | ||
No Income Requirement | ||
No Payments For Up to 30 Years | Repaid at home sale or end of term | Fixed monthly payments for 5–30 years |
No Debt-to-Income Requirement |
A home equity investment (HEI) agreement is not regulated as a loan in all states. Because a lien will be placed on your home, you could be required to sell your home to satisfy repayment obligations. Always review the full terms and consult a financial advisor.
Your home's equity can buy you another home
Here's the problem a lot of people run into: they've built up real wealth in their home, but it's just sitting there. They want to buy a rental property or a vacation home, but coming up with another 20% down payment while carrying their existing mortgage is a tough ask.
That's one of the main use cases Home Equity Investments were built for.
Instead of saving for years or taking on a second monthly payment through a HELOC or home equity loan, a Home Equity Investment gives you a lump sum of cash from your existing home's equity. No monthly payments. No new debt on your credit report. You use that cash as your down payment on the second property, and you repay the investment company's share when you sell one of the homes or at the end of the agreement term, typically 10 to 30 years.
That's the basic idea. The details matter a lot, though, so let's walk through how this actually works.
What is a Home Equity Investment (HEI)?
A Home Equity Investment, sometimes called a Home Equity Agreement (HEA) or shared equity agreement, is not a loan. The company doesn't charge you interest or require monthly repayments. Instead, they give you cash upfront in exchange for a percentage of your home's future value.
When you eventually sell the home, refinance, or reach the end of the contract term, you pay them back their original investment plus their share of any appreciation. If the home went up in value, they make money. If it went down, they share in that loss.
A quick example: Say your home is worth $500,000 and you have $300,000 in equity. An HEI might offer you $75,000 (15% of the home's value) in exchange for a 25% share of the future value. If you sell 8 years later for $650,000, you'd owe them $162,500. Your net gain on the home sale is still $487,500, and you used that $75,000 to buy a rental property that's been generating income for nearly a decade.
That's the trade-off in concrete terms.
HEI vs. your other options: a straight comparison
Using home equity to buy a second property isn't something you have to do through an HEI. There are four main ways to tap your equity, and they work very differently. Here's how they stack up for someone trying to fund a second home or investment property.
The biggest practical difference comes down to debt-to-income ratio (DTI). Most mortgage lenders cap DTI at 43-45%. If you already have a mortgage and want to finance a second property, adding a HELOC or home equity loan payment to your obligations can push you over that limit. An HEI doesn't show up as a debt at all, which is why it's particularly useful for people who are otherwise close to their borrowing ceiling.
That said, if you have strong income, low existing debt, and a good rate on a refinance, a cash-out refi might be cheaper in the long run. Run the numbers both ways before you commit.
What to look for when comparing HEI companies
Not all Home Equity Investment companies are the same. The terms vary more than you'd expect, and the difference between a good deal and a bad one can be tens of thousands of dollars.
The equity percentage they claim. Some companies take a fixed percentage of your home's future value, not just the appreciation. Others calculate their return only on the gain above today's appraised value. This distinction is huge. If a company gives you $75,000 and claims 25% of your home's total future value, that's a very different deal than one that claims 25% of the appreciation only.
The term length. Most agreements run 10 to 30 years. Shorter terms mean you may be forced to sell or refinance sooner than you planned. Look for flexibility here.
Origination and appraisal fees. Expect to pay 3-5% upfront. On a $75,000 investment, that's $2,250 to $3,750 out of pocket before you see a dime.
Appreciation caps and multipliers. Some companies cap how much appreciation they can claim, which protects you in a strong market. Others use "appreciation multipliers" that give them a larger-than-proportional cut of gains. Read this section of the contract carefully, or have a real estate attorney review it.
Buyout options. Can you buy them out early if your financial situation changes? Some companies allow partial buyouts, which gives you more control over the timeline.
Is using your home equity to buy a second property right for you?
An HEI makes sense in a few specific situations. You're a good candidate if your DTI is already too high to qualify for a HELOC or second mortgage, if you're self-employed with irregular income that makes traditional lending difficult, or if you want to invest in a rental property but can't comfortably absorb another monthly payment while still maintaining a cash cushion.
It's probably not the right call if you expect your home to appreciate rapidly in the near term and want to keep all of that gain. In a hot market, giving up 20-25% of your appreciation can be very expensive in hindsight. If you can comfortably qualify for and service a HELOC or home equity loan, those will almost certainly be cheaper over a 10-year horizon.
One more thing worth saying: this is your primary residence. Make sure you understand exactly what you're agreeing to before you sign. These contracts are long and specific, and the terms stick.
How to use your home equity as a down payment: step by step
- Get a current appraisal or use an automated valuation tool to estimate your home's value.
- Subtract your outstanding mortgage balance to find your available equity.
- Figure out how much cash you need for a down payment on the second property. Most lenders require 15-25% down for an investment property.
- Request quotes from multiple HEI companies. Hometap, Point, Unlock, and Splitero are among the largest in the market right now.
- Compare the equity percentage, fees, and term length side by side, not just the headline dollar amount.
- Have a real estate attorney or CFP review the contract before you sign.
- Use the proceeds as your down payment and close on the second property.
The whole process typically takes 3-6 weeks from application to funding.
FAQ
Can I use a Home Equity Investment for an investment property down payment?
Yes. This is one of the most common use cases. You're tapping the equity in your current home to fund the down payment on a rental property or vacation home. The HEI company generally doesn't dictate what you do with the cash once it's in your account.
What happens if my home loses value?
Most HEI companies share in the downside, not just the upside. If your home drops in value, their payout when you sell reflects that lower valuation. This is a meaningful advantage over a home equity loan, where you owe the same balance regardless of what the market does to your home's value.
Can I buy out the HEI company early?
Most agreements allow early buyouts, but you'll pay based on the current appraised value at that time, not the original. If your home has appreciated significantly, buying them out early can be expensive. Check whether the company allows partial buyouts, which can reduce the final settlement amount.
Will an HEI affect my ability to get a mortgage on the second property?
It shouldn't affect your DTI since there's no monthly payment, but the lien on your primary residence will show up in title searches and needs to be disclosed to your new lender. Most lenders are familiar with HEIs, but flag it upfront rather than waiting for underwriting to surface it.
How much equity do I need to qualify?
Most HEI companies require that at least 20-25% equity remain in the home after their investment. So if your home is worth $500,000, you'd typically need $100,000 to $125,000 in remaining equity after they fund you.
Key takeaways
- Home Equity Investments (HEIs) let you convert home equity into cash with no monthly payments — the company is repaid when you sell or refinance.
- HEIs don't affect your debt-to-income ratio, making them useful for buyers who are already near their borrowing limits.
- Most HEI companies offer 10-25% of your home's value in exchange for 15-30% of its future appreciation.
- Origination and appraisal fees typically run 3-5% of the investment amount upfront.
- In a rapidly appreciating market, giving up a percentage of future value can end up costing far more than a traditional loan would have.
- For some, a HELOC or home equity loan may be cheaper than an HEI over a 10-year period — but not everyone can qualify and it all depends on the housing market and the rates you qualify for.
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