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Is a home equity sharing agreement a good idea? Here’s what experts say
Olga Yastremska, New Africa, Africa Studio / Getty Images
Thanks to continued high inflation, the Federal Reserve has been keeping interest rates high for some time. This has led to higher rates on virtually all financial products — and on credit cards in particular, which now have average rates above 21%.
Unsurprisingly, this has led consumers to seek out other products when in need of cash. For homeowners, this has often meant home equity loans and home equity lines of credit (HELOCs), as these borrowing options tend to have much lower rates than credit cards and personal loans in today’s high-rate environment.
But a third option has emerged that comes with no interest at all: the home equity sharing agreement. These allow you to sell off a portion of your home’s future equity for a lump sum of cash. There is no interest tied to this type of agreement, and you make no monthly payments in return for the money. Instead, you repay it when you sell the home or the term runs out. Should you consider a home equity sharing agreement, though?
Find out what your best home equity tapping options are online now.
Is a home equity sharing agreement a good idea? Here’s what experts say
Here’s what experts have to say about when a home equity sharing agreement may or may not be a good idea.
Yes, if you don’t want to take on debt or monthly payments
If you need cash but don’t have the money to make extra payments — or pay interest — home equity sharing could be a smart option to explore.
“It’s not a loan product,” says Michael Micheletti, chief communications officer at Unlock Technologies, a home equity sharing company. “A home equity loan and home equity line of credit are.”
Home equity sharing may also be wise if you don’t want extra debt reflected on your credit profile.
“These agreements allow homeowners to access their home equity without incurring additional debt,” says Michael Crute, a real estate agent and operations strategist with Keller Williams in Atlanta. “This can be particularly useful for those who want to use the funds for investments, renovations, or other significant expenses without increasing their debt-to-income ratio.”
Learn more about the home equity loan and HELOC rates you could qualify for here.
Yes, if you’re worried you won’t qualify for a loan
If you don’t think your credit score, income or other financial details will qualify you for a home equity loan, a home equity sharing agreement can be a viable alternative. According to Micheletti, home equity sharing options have “lower qualification thresholds” than loan products.
“Income requirements are flexible, and agreements are available to retirees and others who may not have a consistent or high income,” Micheletti says. “Credit score requirements are lower, too. Scores in the 500s may qualify.”
This is in stark contrast to home equity loans and HELOCs, which usually require credit scores well into the 600s.
“The homeowners who need this product are those who don’t have the alternative of collateralized options like home equity loans or home equity lines of credit,” says David Shapiro, CEO and founder of EquiFi, a home equity sharing company. “Most of the business being funded today is for homeowners with credit scores between 500 to 680.”
No, if you want big proceeds when you sell
If you’re hoping to cash in on your home’s value and get a big payday once you sell, a home equity sharing agreement might not be for you.
“While there are no monthly payments, the effective cost of capital can be high,” Crute says. “The homeowner essentially sells a portion of future appreciation, which might turn out to be costly if property values rise significantly.”
Let’s say the investor appraises your home at $400,000 and you sell 15% of your future equity, getting $50,000 in return. Once you sell (or your payoff date rolls around), you’ll owe the investor $50,000 plus 15% of any appreciation in your home’s value. If your home sells at $500,000, for instance, you’d owe $50,000 + $15,000 (500,000 x .15) for a total of $65,000.
No, if you’re not sure how much you need
Home equity sharing agreements give you a lump sum payment, so you’ll want to have a rough idea of how much cash you need before taking one out. If you’re not sure what you need, a HELOC may be a better fit, as these let you borrow money incrementally over time, much like a credit card.
“A HELOC can make sense if a homeowner doesn’t know how much — or when — they’ll need the funds,” Micheletti says.
HELOCs can also be helpful if you need extended access to a line of credit. Most let you borrow from your line of credit (up to the credit limit) for at least 10 years.
“Many homeowners do home improvements over time like HELOCs, as they only pay interest on the amounts they use,” says Chad Smith, president of online mortgage lender Better.com. “With HELOCs, you don’t share any appreciation with the lender.”
No, if you want to refinance later on
Finally, home equity sharing might not be wise if you plan to refinance later on. With these agreements, the investor may put a lien against your property until the debt is repaid. And, your lender may not let you refinance with one of these in place.
“If you need additional liquidity or want to refinance your first lien mortgage, there could be restrictions,” Smith says. “Having a lien might impact your ability to secure other things such as home improvement loans, solar financing, or additional home equity loans.”
The terms of home equity sharing agreements vary by investment company, so make sure you understand the terms and fine print before moving forward with one.
“Home equity sharing agreements are often complex legal documents and it’s important for homeowners to fully understand the terms, including how and when the agreement can be terminated, the conditions under which the equity partner can claim their share, the impacts on your ownership rights, implications related to your loan, and any fees or penalties involved,” Crute says.
You should also research the home equity sharing company thoroughly.
“Unlike HELOCs and home loans, which are offered by federally regulated entities, many home equity sharing agreements are funded or financed by private investors, institutional investors, and specialized financial companies,” Crute says. “These entities are often subject to less stringent regulations.”
The bottom line
There are certain cases in which a home equity sharing agreement could be a good alternative to traditional home equity tapping options, but that won’t be true in every case. If you’re considering a home equity sharing agreement (or any other home equity products), it may benefit you to talk to a financial or mortgage professional. That way, they can make recommendations based on your personal situation.
CBS News
After Tyre Nichols’ fatal beating, Memphis officer texted photo of bloodied man to ex-girlfriend, she testifies
A former Memphis police officer charged in the fatal beating of Tyre Nichols sent his ex-girlfriend a photo of the badly injured man on the night he was punched, kicked and hit with a police baton following a traffic stop, according to trial testimony Wednesday.
Brittany Leake, a Memphis officer and Demetrius Haley’s former girlfriend, testified during the criminal trial that she was on the phone with Haley when officers pulled Nichols over for a traffic stop. She said she heard a “commotion,” including verbal orders for someone to give officers his hands.
The call ended, but Haley later texted the photo in a group chat comprising Haley, Leake and her godsister, she testified. Prosecutors displayed the photo for the jury. It showed Nichols with his eyes closed, on the ground with what appeared to be blood near his mouth and his hands behind his back.
Leake said that when she saw the photo, her reaction was: “Oh my God, he definitely needs to go to the Med.”
The Med is shorthand for Memphis’ trauma hospital.
The fatal beating, caught on police bodycams and street surveillance cameras, has sparked protests and calls for police reform. Officers said they pulled over Nichols for reckless driving, but Memphis’ police chief said there was no evidence to substantiate that claim.
Haley, Tadarrius Bean and Justin Smith are on trial after pleading not guilty to charges that they deprived Nichols of his civil rights through excessive force and failure to intervene, and obstructed justice through witness tampering. Their trial began Sept. 9 and is expected to run three to four weeks.
George Walker IV / AP
The Memphis Police Department fired the three men, along with Emmitt Martin III and Desmond Mills Jr., after Nichols’ death. The beating was caught on police video, which was released publicly. The officers were later indicted on the federal charges. Martin and Mills have taken plea deals.
During her testimony Wednesday, Leake said she deleted the photo after she saw it and that sending such a photo is against police policy.
“I wasn’t offended, but it was difficult to look at,” she said.
Leake said Haley had sent her photos before of drugs, and of a person who had been injured in a car accident.
Earlier Wednesday, Martin was on the witness stand for a third day. Defense attorneys tried to show inconsistencies between Martin’s statements to investigators and his court testimony. Martin acknowledged lying about what happened to Memphis Police Department internal investigators, to try to cover up and “justify what I did.”
But Martin said he told the truth to FBI investigators after he pleaded guilty in August, including statements about feeling pressure on his duty belt where his gun was located during the traffic stop, but not being able to see if Nichols was trying to get his gun. Martin has testified that he said “let go of my gun” during the traffic stop.
Martin Zummach, the attorney for Justin Smith, asked Martin if he knew of any reasons why Nichols did not simply say, “I give up.”
“He’s out of it,” Martin said. “Disoriented.”
Martin testified that the situation escalated quickly when Haley pulled his gun and violently yanked Nichols from his car, using expletives and failing to tell Nichols why he had been pulled over and removed from the vehicle.
“He never got a chance to comply,” Martin said.
Nichols, who was Black, was pepper sprayed and hit with a stun gun during the traffic stop, but ran away, police video shows. The five officers, who also are Black, then beat him about a block from his home, as he called out for his mother.
Video shows the officers milling about and talking as Nichols struggled with his injuries. Nichols died Jan. 10, 2023, three days after the beating.
An autopsy report shows Nichols – the father of a boy who is now 7 – died from blows to the head. The report describes brain injuries, and cuts and bruises on his head and elsewhere on his body.
Jesse Guy testified that he was working as a paramedic for the Memphis Fire Department the night of the beating. He arrived at the location after two emergency medical technicians, Robert Long and JaMichael Sandridge.
Guy said he was not told about the medical problems Nichols had experienced before he arrived, and that Nichols was injured, seated on the ground and unresponsive.
Nichols had no pulse and was not breathing, and it “felt like he was lifeless,” Guy said.
In the ambulance, Guy performed CPR and provided mechanical ventilation, and Nichols had a pulse by the time he arrived at the hospital, the paramedic said.
Guy said Long and Sandridge did not say if they had checked Nichols’ pulse and heart rate, and they did not report if they had given him oxygen. When asked by one of Bean’s lawyers whether that information would have been helpful in treating Nichols, Guy said yes.
Long and Sandridge were fired for violating fire department policies after Nichols died. They have not been criminally charged.
The five officers also have been charged with second-degree murder in state court, where they pleaded not guilty. Mills and Martin are expected to change their pleas.
Federal prosecutors have previously recommended a 40-year sentence for Martin. A date has not been set in state court yet.
Nichols worked for FedEx, and he enjoyed skateboarding and photography. The city of Sacramento, where Nichols grew up, named a skatepark in his honor. “Tyre fell in love with skateboarding at a young age and it wasn’t long before it became a part of his lifestyle,” states the resolution approved by the city council. He had a tattoo of his mother’s name.
“Tyre Nichols’ family have been praying for justice and accountability from the very beginning of this tragedy,” Ben Crump and Antonio Romanucci, the civil rights attorneys representing Nichols’ family, said in a statement when the trial began.
Boeing’s CEO said Wednesday that the company will begin furloughing “a large number” of employees to conserve cash during the strike by union machinists that began last week.
Chief Executive Kelly Ortberg said the people who would be required to take time off without pay starting in coming days include executives, managers and other employees based in the U.S.
“While this is a tough decision that impacts everybody, it is in an effort to preserve our long-term future and help us navigate through this very difficult time,” Ortberg said in a company-wide message to staff.
Boeing didn’t say how many people will face rolling furloughs, but the number is expected to run into the tens of thousands. The aerospace giant had 171,000 employees at the start of the year.
About 33,000 Boeing factory workers in the Pacific Northwest began a strike Friday after rejecting a proposal to raise pay by 25% over four years. They want raises of at least 40%, the return of a traditional pension plan and other improvements in the contract offer they voted down.
Scott Brauer / Bloomberg via Getty Images
The strike is halting production of several airplane models including Boeing’s best-selling plane, the 737 Max. The company gets more than half of the purchase price when new planes are delivered to buyers, so the strike will quickly hurt Boeing’s cash flow.
Ortberg said selected employees will be furloughed for one week every four weeks while retaining their benefits. The CEO and other senior executives will take pay cuts during the duration of the strike, he said, without stating how deep the cuts will be.
All work related to safety, quality, customer support and certification of new planes will continue during the furloughs, he said, including production of 787 Dreamliner jets, which are built by nonunion workers in South Carolina.
Ortberg said in a memo to employees that the company is talking to the International Association of Machinists and Aerospace Workers about a new contract agreement that could be ratified.
“However, with production paused across many key programs in the Pacific Northwest, our business faces substantial challenges and it is important that we take difficult steps to preserve cash and ensure that Boeing is able to successfully recover,” he said.
Boeing’s chief financial officer warned employees earlier this week that temporary layoffs were possible.
The company, which is based in Arlington, Virginia, but has most of its commercial-airplanes business located in the Pacific Northwest, is also cutting spending on suppliers, freezing hiring and eliminating most travel.
Despite two full days of talks assisted by the Federal Mediation and Conciliation Service, the union said Wednesday that no resolution had been reached and no additional negotiations were scheduled, according to CBS Seattle affiliate KIRO-TV.
Striking workers are picketing at several locations in the Seattle area, Oregon and California. The union, which recommended the offer that members later rejected by a 96% vote, is surveying the workers to learn what they want in a new contract. The union’s last strike at Boeing, in 2008, lasted about two months.
If the walkout doesn’t end soon, Boeing’s credit rating could be downgraded to non-investment or junk status, which would make borrowing more expensive. Shortly after the walkout began Friday, Moody’s put Boeing on review for a possible downgrade, and Fitch said a strike longer than two weeks would make a downgrade more likely.
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