Factors When Choosing Between Home Equity Loans vs. Equity Sharing Agreements vs. Reverse Mortgages

When homeowners want to access the equity in their home, they typically do so through either a home equity loan, an equity sharing agreement, or a reverse mortgage. Each option has its own set of considerations that homeowners should be aware of before making a decision.

Home Equity Loans

A home equity loan is a loan that is secured by the equity in your home. This means that if you default on the loan, the lender can foreclose on your home. Home equity loans typically have much lower interest rates than unsecured loans, making them a good option for homeowners who need to borrow a large amount of money.

Equity Sharing Agreements

An equity sharing agreement is an agreement between a homeowner and an investor in which the investor provides funding for a portion of the purchase price of the home in exchange for a percentage of the equity in the home. Equity sharing agreements can be a good option for homeowners who need to access equity but do not want to take on the risk of a loan.

Reverse Mortgages

A reverse mortgage is a loan that allows homeowners to access the equity in their home without having to make monthly loan payments. Instead, the loan is paid off when the home is sold. Reverse mortgages can be a good option for homeowners who do not want to make monthly loan payments but want to keep their home equity accessible.

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