On this page
The two in one sentence each
A HELOC (home equity line of credit) is a loan. It’s a credit line recorded behind your current mortgage: you borrow what you need, pay on what you’ve borrowed, and your first mortgage doesn’t change. The 5-Day HELOC guide covers it in detail.
A HEA (Home Equity Agreement — you’ll also see “home equity investment” or “equity-sharing agreement”) isn’t a loan. A company pays you a lump sum now and, in return, receives a share of your home’s future value when you sell, refinance or buy out the agreement. There’s no monthly payment and no interest. The cost is the share of value you hand over at the end.
How they compare, line by line
Is it a loan?
- HELOC
- Yes — a revolving credit line in second position
- Home Equity Agreement
- No — cash now for a share of future home value
Monthly payment
- HELOC
- Yes, on the amount you’ve drawn
- Home Equity Agreement
- None — settled when you sell, refinance or buy out
Credit needed
- HELOC
- 620 minimum; the no-income-verification version needs 680+
- Home Equity Agreement
- From the 500s
Future appreciation
- HELOC
- All of it stays yours
- Home Equity Agreement
- The company receives its agreed share at the end
How much
- HELOC
- $50,000 to $5,000,000
- Home Equity Agreement
- $50,000 to $600,000
Combined LTV limit
- HELOC
- Up to 90% (80% in Texas)
- Home Equity Agreement
- Set by credit: 60% at 500–539, 65% at 540–579, 75% at 580+
Upfront costs
- HELOC
- Depends on the program — quoted with your scenario
- Home Equity Agreement
- 4.99% origination plus roughly $2,500 in title costs
Income paperwork
- HELOC
- No tax returns; stated-income version at 680+
- Home Equity Agreement
- Light — income documents aren’t what decides it
Time to funds
- HELOC
- As little as 5 business days (Texas: 12-day minimum)
- Home Equity Agreement
- A few weeks, which is normal for this kind of product
States
- HELOC
- Primary home: 30 states. Investment property: 30 states
- Home Equity Agreement
- 11 states: AZ, CA, CO, FL, OH, OR, PA, TN, UT, VA and WA
Loan purpose
- HELOC
- Refinance only, on a home you already own
- Home Equity Agreement
- Refinance only, on a home you already own
What each one really costs you
With a HELOC, you pay interest as you go, and you need the credit and the budget for a monthly payment. With a HEA, you pay nothing month to month and weaker credit is fine — the company gets paid from its share of your home’s future value. If your home goes up a lot in value, that share can end up costing more than HELOC interest would have. Neither one is better across the board; each is built for a different situation.
Credit under 620? Look at the HEA
For homeowners with damaged credit who need equity, the HEA is one of the few straightforward options. Credit in the 500s is accepted because there’s no monthly payment to qualify for. Your score sets the maximum combined LTV — 60% at 500–539, 65% at 540–579 and 75% at 580 and up — in 11 states. The HEA page has the full details.
Which one I’d point you to
620+ credit and a payment you can handle
Almost always the HELOC. Keeping all of your appreciation is worth a payment that fits comfortably.
Under 620, in a state where the HEA is offered
The HEA. This is exactly the situation it was made for.
Strong credit, but income paperwork is the problem
The no income verification HELOC — 680+ credit, lines from $150K.
No monthly payment, no matter what
The HEA, and I’ll put the trade-off in writing so you can see it clearly.
Age 62 or older
Add a reverse mortgage to the comparison before you decide.
