Shared Equity Agreement: Convert Home Equity Into Cash With No Payment or Interest

Our content may contain affiliate links. If you click a link and apply, we may receive compensation at no added cost to you. We work hard to provide great information and appreciate your support!

A shared equity agreement is a unique and little-known way to convert home equity into cash with no mortgage payment and no interest – even if you have limited income and/or low credit scores. Sounds intriguing, right? But is it legit? We’ll cover how it works and a few things to watch out for.

What Is A Shared Equity Agreement?

So, what is a shared equity agreement and how does it work? A shared equity agreement is also commonly referred to as an equity sharing agreement, shared equity loan, home equity agreement, or shared appreciation loan.

A shared equity loan enables you to borrow from your home equity with no mortgage payment and zero interest – even if you have low credit scores and/or limited income.

Homeowners commonly use shared equity agreements to:

  • Reduce monthly expenses by paying off high interest credit cards, personal loans, auto loans and other debts.
  • Rebuild credit scores by reducing outstanding debt and cleaning up damaging collections and charge offs.
  • Pay burdensome medical, dental, and vet bills, which can run into the thousands of dollars or more. 
  • Pay for home repairs and improvements.
  • Set up a rainy day fund to cover financial emergencies.
  • Pay for college tuition and expenses.

. . . or anything else you can think of! For most homeowners, there are no restrictions on how you use the funds. You can use the money for pretty much whatever you like. 

How an Equity Share Agreement Works

Shared equity finance agreements can be structured in a variety of ways, but here’s how they generally work:

  • You receive a large lump sum of cash based on the equity in your home. Again, you can use the cash for whatever you like: pay off debt, improve credit scores, pay medical, dental, or vet bills, do home improvements, pay college expenses, set up a rainy day fund, or make a large purchase.
  • No monthly payments are required and no interest is charged. This can be a big advantage over a traditional cash out refinance, home equity loan, or HELOC.

In exchange for the lump sum, you agree to repay the lender a percentage of the value of your home at a future date, such as when you sell the home, the last borrower passes away, or the contract term ends.

  • You remain the owner of your home, which means you’ll continue to pay your property taxes, homeowner’s insurance, and existing mortgage payments and HOA dues (if applicable).
  • There are no minimum income requirements. Because there are no monthly payments, there are typically no income requirements.
  • You may qualify even if you have bad credit. Minimum credit scores are usually around 500.
  • Keep your existing mortgage. You may be able to qualify with and keep your existing mortgage.
  • No age minimums. A home equity agreement could be a good option for homeowners who are too young to qualify for a reverse mortgage. The minimum qualifying age for a reverse mortgage is typically 62.

Shared equity agreements aren’t available in all states. Click the button below to find out if you’re eligible with leading provider Unlock.

Check Eligibility

Other Considerations

The shared equity agreement is a legitimate product, but there are some things you’ll want to consider to make sure it’s a good fit.

Remember, the lender eventually wants to get their money back plus a share of the home value. Home equity agreements typically have end datethat ranges from 10 to 30 years, depending on who you’re working with.

If you don’t sell your home by the end date, you’ll need to repay the investor using cash, another loan, or some combination of both.

Closing costs can equal 3%-6% of your payout. Home equity agreement companies often charge origination fees along with the usual home loan fees like title, escrow, recording, appraisal, credit report, etc.

There may be some additional fees at the end of the contract as well. Make sure the lender spells out what you can expect before sign on the dotted line.

Even though there’s no payment, it’s still possible to default. Default events include falling behind on existing mortgage payments, property taxes, homeowner’s insurance, and HOA dues (if applicable). Other defaults could include zoning restriction violations, unpermitted additions and modifications, bankruptcy, and letting the home deteriorate.

If you default, you may have to reimburse the lender for fees incurred to work out and resolve the default. If the default is serious and can’t be resolved, you could face foreclosure.

The shared equity agreement is a legitimate product, but it’s different than what most homeowners are used to. Even if you’re working with a reputable company who discloses and explains everything thoroughly, it can be easy to overlook important considerations that could have a significant negative impact in the future.

Make sure you thoroughly understand how the home equity agreement works and get all your questions answered before signing on the dotted line.

Frequently Asked Questions

Are shared equity agreements a good idea?

Whether an equity share agreement is a good idea or not depends on your goals and financial situation. Such agreements offer access to your home equity without a regular loan. No payment is required and zero interest is charged in exchange for a share of your future home value. A shared equity agreement could be a good option if you have limited income and/or poor credit and can’t qualify for a traditional mortgage, home equity loan, or HELOC.

What is an equity share in property?

An equity share agreement is a little-known way to convert home equity into cash. The advantage of an equity share is that you’re typically not required to make a mortgage payment there is usually no interest charged. Because there is no payment, it can often be easier to qualify for an equity shared agreement than a traditional loan, even if you have limited income and/or low credit scores.

Is selling equity in your house a good idea?

Whether selling equity in your house is a good idea or not depends on your goals and financial situation. Such agreements offer access to your home equity without a regular loan. No payment is required and zero interest is charged in exchange for a share of your future home value. A shared equity agreement could be a good option if you have limited income and/or poor credit and can’t qualify for a traditional mortgage, home equity loan, or HELOC.

How do you qualify for a shared equity loan?

You need to own your home, maintain it reasonably well, and have a significant amount of home equity. There are typically no income requirements, but you will likely need to have at least a 500 credit score.

How much does a shared appreciation loan cost?

Closing costs for a shared appreciation loan vary, but they’re comparable to a regular mortgage of the same loan amount. You can expect the closing costs to range between 3% to 6% of your shared appreciation loan payout amount.

Check Eligibility
Mike Roberts
About Mike Roberts

Mike Roberts is the founder of HEAZone.com, a published author, and a highly experienced veteran of the mortgage industry. When he's not working, he enjoys spending time with his family, skiing, camping, traveling, or reading a good book. Roberts is the author of The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage, which is available on Amazon.