However, working with a home equity sharing company involves some risks that you’ll want to understand and weigh.<\/p>\n\n\n\n\n\n
![\"homelight](\"https:\/\/www.homelight.com\/blog\/wp-content\/themes\/ccprototypev5\/images\/logo-small-cta.png\"){kind=logo}
\n <\/div>\n \n How Much Is Your Home Worth Now?<\/h3>\n
Home values have rapidly increased in recent years. How much is your current home worth now? Get a ballpark estimate from HomeLight’s free Home Value Estimator.<\/p>\n \n
Editor\u2019s note: This post is meant for educational purposes, not investment advice. If you need assistance navigating home equity sharing companies, HomeLight always encourages you to reach out to your own financial advisor.<\/em><\/p>\n Home equity sharing is a financial arrangement where a company invests in your home in exchange for a percentage of its future value. Instead of taking out a traditional loan<\/a>, you partner with a company that provides you with a lump sum of cash. In return, the company shares in the appreciation (or depreciation) of your home\u2019s value when you sell or refinance.<\/p>\n This alternative financing option is appealing because it doesn’t require monthly payments or accrue interest. It\u2019s a way to unlock your home\u2019s value while avoiding additional debt.<\/p>\n Depending on your situation, a home equity sharing agreement might also be an option to get cash for a down payment <\/a>on a house. However, there are a number of factors to consider, and this path is not for everyone.<\/p>\n Let\u2019s look at an example of how a home equity sharing agreement might work. For clarity, we\u2019ll use a $400,000 home value. This could be how much your paid-off home is worth, or how much equity stake you own in the property.<\/p>\n If an investment company buys a 20% stake in your home equity and your home is worth $400,000, it would give you a $80,000 lump sum.<\/p>\n At the end of 10 years, the home appreciates to approximately $537,566. The homeowner will need to pay back the original investment ($80,000) plus the investor’s 20% stake in the home’s $137,566 appreciation amount ($27,513). In this case, the payback amount would be about $107,513.<\/p>\n Below is a table that shows the breakdown of this home equity sharing scenario, and what happens if, for some reason, the home depreciates in value \u2014 since it is an investment venture, after all.<\/p>\n A common question about home equity sharing companies is what happens if your home loses value. With home equity sharing, the company shares in both the appreciation and depreciation of your property.<\/p>\n If your home\u2019s value decreases, the amount you owe the company will also decrease. As shown in the example above, if your home\u2019s value drops from $400,000 to $380,000 and the company has a 20% equity share, it would receive $60,000 instead of the original $80,000.<\/p>\n","protected":false},"excerpt":{"rendered":" Discover how home equity sharing companies can help you access cash without loans or monthly payments. Learn the risks and see a list of top HEA companies.<\/p>\n","protected":false},"author":298,"featured_media":44863,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"cybocfi_hide_featured_image":"","footnotes":""},"categories":[192,629,632],"tags":[],"class_list":["post-44861","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-for-buyers","category-home-financing","category-mortgage-loans"],"acf":[],"yoast_head":"\nWhat is home equity sharing?<\/h2>\n
How does home equity sharing work?<\/h2>\n
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\n <\/td>\n If your home appreciates<\/strong><\/td>\n If your home depreciates<\/strong><\/td>\n<\/tr>\n \n Starting home value<\/strong><\/td>\n $400,000<\/td>\n $400,000<\/td>\n<\/tr>\n \n Home value at repayment<\/strong><\/td>\n $537,566<\/td>\n $380,000<\/td>\n<\/tr>\n \n Total increase\/decrease<\/strong><\/td>\n $137,566<\/td>\n -$20,000<\/td>\n<\/tr>\n \n Shared equity percentage<\/strong><\/td>\n 20% (for gain of $27,513)<\/td>\n N\/A (loss of $20,000)<\/td>\n<\/tr>\n \n Original funding amount<\/strong><\/td>\n $80,000<\/td>\n $80,000<\/td>\n<\/tr>\n \n Amount you owe the investor<\/strong><\/td>\n $107,513<\/td>\n $60,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n What if your home depreciates in value?<\/h2>\n