What Is a Home Equity Investment (HEI)?
A plain-language explanation of how home equity investments work — including the mechanics, costs, settlement obligations, and risks homeowners should understand.
Published by House Partner · Updated September 30, 2026
A Home Equity Investment (HEI) is a financial arrangement in which a homeowner receives a lump sum of cash in exchange for giving the investment company a share of the home's future value. Unlike a home-equity loan or HELOC, an HEI typically does not require monthly payments to the investment provider. Instead, the homeowner owes a single settlement payment at a future date — usually when the home is sold, the contract term ends, or certain other events occur.
HEIs have grown in visibility as an alternative to traditional borrowing for homeowners who have equity but may not qualify for — or prefer to avoid — conventional debt products. However, they involve significant costs and obligations that are important to understand before signing.
How a home equity investment typically works
In a typical HEI arrangement, the investment company provides the homeowner with a cash payment — often a percentage of the home's appraised value. In return, the homeowner agrees to pay the company a settlement amount at a future date. That settlement amount depends on the contract's formula, which may consider both the starting and future home values, the amount received, and other adjustments.
The specific formula varies by provider. Some HEIs are structured around a share of the home's total future value, while others focus on a share of the appreciation (the increase in value). Many contracts also apply a multiplier or risk adjustment to the company's initial investment, which can increase the settlement amount beyond the home's actual change in value.
The homeowner continues to live in the home and retains title. However, the HEI company typically places a lien on the property to secure its interest.
What the homeowner still pays during the contract
While an HEI may not require monthly payments to the investment provider, the homeowner's existing obligations continue. These typically include:
- Mortgage payments (the HEI does not replace or pay off the existing mortgage unless proceeds are used for that purpose)
- Property taxes
- Homeowners insurance
- Maintenance and repairs necessary to preserve the home's condition
- Any homeowners association fees or other property-related obligations
Failing to meet these obligations can trigger a default under the HEI contract, which may lead to the company requiring early settlement or taking action to protect its interest in the property.
When settlement happens
Settlement — the point at which the homeowner must pay the HEI company its share — can be triggered by several events. Common triggers include:
- Selling the home
- Reaching the end of the contract term (typically 10 to 30 years, depending on the provider)
- Refinancing the mortgage in certain circumstances
- Defaulting on the HEI contract terms (such as failing to pay property taxes or maintain insurance)
- The homeowner's death, depending on contract terms
At settlement, the homeowner owes the investment company the agreed-upon amount, which is calculated according to the contract's formula — this may factor in the home's starting value, its value at settlement, the initial investment amount, any multiplier, and other adjustments. If the homeowner cannot pay from sale proceeds, they may need to refinance, sell the home, or find another source of funds.
What an HEI typically costs
HEIs are often marketed as having no interest and no monthly payments. While those statements may be technically accurate in a narrow sense, HEIs are not free. The costs include:
- The share of the home's future value or appreciation owed at settlement, which can be substantial if the home increases in value
- Origination or processing fees, typically 3–5% of the initial investment amount
- Appraisal fees, title fees, and other third-party closing costs
- The effect of any multiplier or risk adjustment applied to the initial investment amount
The CFPB has noted that in some cases, the effective cost of an HEI can exceed the cost of a HELOC or home-equity loan when measured over the contract term. The total cost depends on how much the home appreciates, how long the contract lasts, and the specific terms of the agreement.
Potential benefits
For some homeowners, an HEI may offer advantages over traditional borrowing:
- No monthly payments to the HEI provider during the contract term
- May be available to homeowners who do not qualify for traditional loans due to credit, income, or other factors
- Does not add a new monthly debt payment, which may help with cash flow
- The homeowner continues to live in and use the home
These benefits should be weighed against the costs and risks described elsewhere in this guide. A lower monthly obligation today does not necessarily mean a lower total cost over the life of the arrangement.
Risks and tradeoffs
HEIs carry risks that homeowners should understand clearly before signing:
- The settlement amount can grow substantially if the home appreciates, potentially costing far more than a traditional loan would have
- If the homeowner cannot pay the settlement amount when it comes due — at contract end, sale, or another trigger — they may be forced to sell the home or face foreclosure proceedings
- The lien placed on the property can limit the homeowner's ability to refinance, take out a home-equity loan, or make other financial moves
- Contract terms are not standardized across the industry, making it difficult to compare offerings or fully understand what is being agreed to
- If the home decreases in value, some contracts still require a minimum payment — the homeowner may not benefit fully from the downside protection that some providers advertise
The CFPB's review of the HEI market found that some homeowners reported being surprised by settlement amounts and felt misled about certain aspects of their agreements. Understanding the full contract terms before signing is essential.
Is an HEI a loan?
HEI providers typically describe their products as "not a loan." Whether that characterization is accurate depends on the specific contract terms and applicable legal definitions, which can vary by state and context.
What is clear is that an HEI creates a financial obligation secured by the home. The homeowner owes a future payment, the company holds a lien on the property, and failure to meet the contract terms can result in foreclosure. Regardless of the legal classification, homeowners should evaluate an HEI with the same care they would apply to any financial arrangement that puts their home at risk.
Who might consider an HEI
An HEI may be worth exploring for homeowners who have significant home equity, need access to cash, and either cannot qualify for traditional borrowing or prefer to avoid monthly debt payments. It may also be considered by homeowners who are confident they can settle the obligation when it comes due — whether through a future sale, refinance, or other means.
An HEI is generally less appropriate for homeowners who have limited equity, are uncertain about their long-term housing plans, or do not have a realistic plan for how they will settle the obligation at the end of the contract term.
Questions to ask before signing
Before entering an HEI agreement, homeowners should understand the answers to these questions at a minimum:
- What is the exact formula used to calculate the settlement amount?
- What is the maximum I could owe under different home-value scenarios?
- What events trigger settlement, and what happens if I cannot pay?
- What fees are deducted from the initial payment I receive?
- Does the contract place a lien on my property, and how does that affect my ability to refinance?
- What are my obligations during the contract term (maintenance, insurance, taxes)?
- Can I settle early, and is there a cost for doing so?
For a more detailed list, see questions to ask before signing a home equity investment.
Sources and further help
These authoritative resources provide additional information and may be updated as programs or guidance change.
Wondering whether an HEI fits your situation?
House Partner helps Utah homeowners explore equity-based options, including home equity investments. There is no obligation to move forward.
Explore HEI options