A lesser-known way homeowners can tap equity without monthly payments

For a long time, homeowners looking to turn part of their home value into cash usually chose between a home equity loan and a home equity line of credit, or HELOC. Both require monthly payments tied to the amount borrowed. A newer option, known as a home equity investment — also called home equity agreement or home equity sharing — works differently. The homeowner gets a lump sum upfront and makes no monthly payments. In return, the provider receives a share of the home’s future value.

No one equity product fits every situation, and each comes with trade-offs. Hometap compares a home equity investment with a HELOC by looking at how they work, what they cost and which homeowners they may suit best.

How a HELOC Works

A HELOC is a revolving credit line backed by your home, much like a credit card. During the draw period, which typically lasts about 10 years, borrowers can take funds as needed against their available equity and usually make interest-only payments on what they use.

HELOC rates are generally variable, so they can rise or fall with broader market conditions and change monthly payments. The national average HELOC rate was about 7.36% as of October 2026, according to Bankrate, though an individual rate depends on factors such as credit history, loan-to-value ratio and the lender.

Once the draw period ends, the repayment period begins. That phase usually lasts 15 to 20 years, and borrowers repay principal and interest each month until the balance is gone. Because a HELOC is a line of credit, interest accumulates on every dollar borrowed.

How a Home Equity Investment Works

With a home equity investment, a homeowner receives part of their equity as a lump sum in exchange for giving the investor a share of the home’s future value or appreciation. There are no monthly payments. The investment is repaid through a buyout using savings, a refinance, another loan or a home sale. Repayment can happen at any point during the term, which is usually 10 to 30 years.

How They Compare

Just as HELOC terms can differ by lender, the structure of a home equity investment can vary by investor. The points below generally apply to most HELOCs and home equity investments, though specific terms may differ.

The Pros and Cons of a HELOC

• Lets homeowners borrow only what they need, when they need it

• Interest is charged only on the amount drawn, not the full credit limit

• Can act as a backup source of funds for unexpected expenses

• Often allows access to a larger portion of home equity, commonly 80% to 85%

• Variable rates can make monthly payments rise or fall

• Payments start as soon as money is taken out

• Approval usually depends on verified income and debt-to-income limits

• Some lenders set a minimum draw, which may force borrowers to take more than they want

• A credit line may be frozen if a borrower’s credit score falls

The Pros and Cons of a Home Equity Investment

• No monthly payments during the term

• Does not affect the mortgage rate

• No income requirement, which may help homeowners with nontraditional earnings

• Provides a lump sum that may work well for fixed-cost projects, such as a renovation with a set budget

• No penalty for paying it off early

• Payoff costs depend on when the homeowner settles and what the home is worth at that time

• Limits access to 27% of the home’s value, which is less than many HELOCs allow

• Not offered in every state or for every type of property

Costs and Eligibility

Questions to Consider Before Choosing

The best option depends on a homeowner’s goals, timing and comfort level with monthly payments versus sharing a portion of the home’s future value. A financial advisor can help compare those factors.