Two ways to tap equity with no monthly payment, and they could not be more different
On the surface, a home equity investment and a reverse mortgage look like cousins. Both hand you cash out of your home, and neither adds a monthly payment. Under the hood, though, they are built on opposite ideas. One sells a slice of your future to an investor on a deadline. The other is a federally insured loan you never have to pay back while you live in the home. Which one fits comes down to your age, your existing mortgage, and how long you plan to stay.
Updated
On this page
- Two ways to tap equity with no monthly…
- What is a home equity investment
- What is a reverse mortgage?
- Home equity investment vs reverse mortgage
- What it looks like with real numbers
- Where an HEI can make sense
- Where a reverse mortgage wins
- The regulation gap
- Who an HEI or reverse mortgage fits
- Reverse mortgage calculator
- Frequently asked questions
- Authoritative sources
- Related guides
- Explore all guides
- Areas I serve
What is a home equity investment (HEI)?
First, the basics. A home equity investment, also called a shared appreciation agreement, is money an investor gives you now in exchange for a slice of what your home is worth later. Companies like Point, Hometap, Unlock, and Unison offer them. It is written as an equity-sharing or option contract rather than a loan, which is central to how it behaves and how it is regulated.
Because it is not structured as a traditional loan, an HEI has some real appeal. You take a lump sum with no monthly payment, there is no age minimum, and underwriting is looser, with credit scores accepted down into the 500s. It sits in second or third lien position, so you keep a low-rate first mortgage untouched. The catch is on the back end: the investor applies a starting valuation discount of 5 percent to 15 percent, takes a set share of your ending value, and the whole thing balloons due in 10 to 30 years.
What is a reverse mortgage?
A reverse mortgage is a loan that lets homeowners 62 and older (55 and older on some proprietary programs) convert equity into cash with no monthly payment. The most common is the FHA-insured HECM. Interest and a 0.5 percent annual insurance premium accrue on the balance instead of a monthly bill, and you repay when you sell, move out, or pass away. It must be in first lien position, so any existing mortgage is paid off at closing. For the mechanics, see how a reverse mortgage works, the principal limit, and costs.
Home equity investment vs reverse mortgage, side by side
| Feature | Home equity investment (HEI) | Reverse mortgage (HECM) |
|---|---|---|
| Legal instrument | Equity-share or option contract (increasingly challenged as a loan) | FHA-insured mortgage, HUD Section 255, non-recourse |
| Age requirement | 18+, no senior minimum | 62+ (55+ some proprietary) |
| Lien position | Subordinate 2nd or 3rd; you keep your 1st mortgage | Senior 1st lien; existing mortgage paid off at closing |
| Repayment | Balloon, due in 10 to 30 years | No maturity; due only when you leave the home |
| How you receive it | Lump sum only | Lump sum, monthly payments, or a growing line of credit |
| What it costs you | A share of ending value, after a 5% to 15% starting haircut | Interest plus a 0.5% annual insurance premium on the balance |
| Downside protection | Investor shares in depreciation | FHA non-recourse: you never owe more than the home is worth |
| Oversight | State by state, active litigation and new licensing bills | Federal HUD/FHA and CFPB, mandatory HUD counseling |
What it looks like with real numbers
Next, the part that decides most cases. Consider a $600,000 home where you take $100,000 in equity, stay 10 years, and the home appreciates 4 percent a year. Here is how the two products play out on the same facts.
| After 10 years | Home equity investment (HEI) | Reverse mortgage (HECM) |
|---|---|---|
| Starting value used | $540,000 (after a 10% haircut) | $600,000 (full appraised value) |
| Terms | $100,000 for 30% of the ending value | $100,000 drawn at closing, no monthly payment |
| Home value at year 10 | $888,147 | $888,147 |
| Payoff owed | $266,444 (30% of ending value) | about $189,584 |
| Net cost of the capital | about $166,444 | about $89,584 |
| At year 10 | Mandatory payoff: sell, refinance, or pay cash | No payment due; the loan simply continues |
These numbers are illustrative, drawn from a standard side-by-side model, not a quote. As a result, the takeaway is about direction, not decimals: in an appreciating market, the appreciation you hand an HEI usually costs more than the interest on a reverse mortgage, and the HEI adds a hard deadline the reverse mortgage does not have.
Reverse Mortgage Calculator
Let’s put the reverse mortgage side to real numbers on your home.
A reverse mortgage is a loan. The balance grows over time and is repaid when the last borrower leaves the home. You keep the title, and you remain responsible for property taxes, homeowners insurance, and upkeep.
Where an HEI can make sense
To be fair, an HEI is the better tool in a few real situations. It fits a homeowner under 62 who cannot use a reverse mortgage yet, someone protecting a very low first-mortgage rate they refuse to give up, or a borrower with bruised credit and a short, verified exit plan, such as selling within three to five years. In those cases the balloon is manageable because the exit is already in sight.
Where a reverse mortgage wins
For a homeowner who is 62 or older and plans to stay, the reverse mortgage usually wins on the things that matter most in retirement. There is no balloon, so no one can force a sale on a deadline. The unused line of credit grows at the note rate regardless of what home values do, which is a real buffer against a down market. And the FHA non-recourse shield plus mandatory HUD counseling give protections an HEI simply does not carry today. The line of credit growth guide shows why that buffer is so useful.
The regulation gap, and why it matters in Washington
Then there is the fine print that rarely makes the sales pitch. Many HEI providers write their agreements as equity purchases specifically to bypass Truth in Lending and RESPA disclosure rules, usury caps, and foreclosure protections. That framing is now under pressure. States including Maine, Washington, Connecticut, and Pennsylvania have moved to require HEI providers to license as lenders and to cap annualized returns.
Washington is the clearest example. On August 7, 2025, the Ninth Circuit ruled in Olson v. Unison that a home equity investment was in substance a shared-appreciation reverse mortgage under Washington’s Consumer Loan Act, because the company advanced money that had to be repaid later. Unison asked for rehearing, so the law may keep shifting, but the direction is telling. By contrast, a HECM already operates under federal HUD and CFPB oversight, with non-recourse language, a $6,000 origination fee ceiling, financial-assessment guardrails, and independent counseling built in.
Who this actually fits
| Your situation | Usually the better fit | Why |
|---|---|---|
| 62+, substantial equity, want to age in place | Reverse mortgage | No balloon, non-recourse safety, and an optional growing line of credit |
| Under 62, low first-mortgage rate, short stay with a real exit | HEI (or a HELOC or 2nd) | Keeps your low first mortgage in place, if you have a verified exit |
| Retiree who wants a standby reserve, not cash today | Reverse mortgage line of credit | An HEI is lump sum only; the HECM line grows and charges interest only on what you draw |
Honestly, the right answer depends on your age, your existing mortgage, how long you plan to stay, and how much appreciation you are willing to trade. It is worth a conversation before you sign anything, and I am happy to quote both sides so you can see the numbers on your own home.
Frequently asked questions
Is an HEI a loan?
HEI providers structure a home equity investment as an equity-sharing or option contract, not a loan, so it can sidestep interest-rate and APR disclosure rules. Courts are increasingly skeptical of that framing. In August 2025 the Ninth Circuit held that a Unison HEI was actually a reverse mortgage under Washington’s Consumer Loan Act because the company advanced money that had to be repaid later.
Do you have to be 62 to get an HEI?
No. A home equity investment has no senior age requirement, so pre-retirees under 62 can use one. A HECM reverse mortgage requires the youngest borrower to be at least 62, and some proprietary programs start at 55. Washington sets that floor at 60 and Texas at 62.
Does an HEI have monthly payments?
No. Neither an HEI nor a reverse mortgage requires monthly principal-and-interest payments. The difference is the exit: an HEI has a hard 10 to 30 year balloon, while a reverse mortgage has no maturity date and comes due only when you leave the home.
Is a reverse mortgage cheaper than an HEI?
Often, in an appreciating market. Take a common 10-year example on a $600,000 home growing 4 percent a year. Once you value the appreciation you hand over, an HEI can cost the equivalent of a double-digit annual rate. A reverse mortgage on the same facts usually costs less, because you pay interest on the money you use instead of sharing your home’s future value. Your actual reverse mortgage terms depend on the day, so ask for a current quote.
Can I keep my low first mortgage with an HEI?
Yes. An HEI sits in a subordinate second or third lien position, so you keep an existing low-rate first mortgage. A reverse mortgage must be in first lien position, so any existing mortgage is paid off at closing out of the proceeds.
Can I lose my home with an HEI?
The risk is the balloon. At the 10 or 30 year maturity you must buy out the investor in full by refinancing, paying cash, or selling. If you cannot, a forced sale can follow. A reverse mortgage has no maturity date and cannot be called due as long as you keep up taxes, insurance, and upkeep and live in the home.
Which has stronger consumer protections?
The reverse mortgage, by a wide margin today. HECMs carry an FHA non-recourse guarantee, capped origination fees, and mandatory independent HUD counseling. HEIs are regulated state by state and are the subject of active litigation and new licensing bills.
Authoritative sources
For independent research and consumer guidance behind this comparison: National Consumer Law Center on home equity investments, the Center for Retirement Research at Boston College, the Federal Trade Commission, and the Consumer Financial Protection Bureau. For the Washington ruling, see coverage of Olson v. Unison.
Related guides
Keep comparing: reverse mortgage vs HELOC, types of reverse mortgages, costs, principal limit, how it works, and is it right for me.
Learn how reverse mortgages work
Want the full picture? These guides cover everything, no local sales pitch, just the facts.
Areas I serve
I am licensed in five states and work with homeowners in each. Choose yours for local retirement detail.
About Christopher Gibson
Christopher Gibson (NMLS #1910430) is an independent mortgage and reverse mortgage broker with C2 Financial Corporation (NMLS #135622), serving homeowners across the states he is licensed in. Mailing address: 9030 35th Ave SW, Seattle, WA 98126. Call or text 720-449-6622. More about Christopher.