Equity Sharing Models Explained: A Comprehensive Guide for Homeowners

Owning a home is a dream for many, but traditional mortgages don’t always work for everyone. If you’ve faced credit challenges or need flexible financing, there’s another way to achieve ownership.

Equity sharing lets you partner with investors or community programs to buy or access funds for your property. Instead of monthly payments, you share a portion of your home’s future value. This approach helps 16% of U.S. homeowners who struggle with conventional loans.

Benefits include no monthly payments, easier qualifications, and the chance to build wealth. Companies like Hometap and Unison offer investor-driven options, while community land trusts provide affordable paths to real estate.

Whether you’re buying or tapping into your home’s value, these programs open doors. Let’s explore how they work.

What Are Equity Sharing Models?

Imagine buying a home without traditional mortgage stress. Shared equity agreements let you partner with investors or nonprofits to split costs and future gains. Unlike loans, these deals focus on long-term affordability and flexibility.

Defining Shared Equity Agreements

A Home Equity Agreement (HEA) isn’t a loan—it’s an investment. Companies like Unlock Technologies provide cash upfront in exchange for a share of your property’s future value. No monthly payments or credit checks are needed.

Community Land Trusts (CLTs) take a different approach. They own the land while you buy the house, using 99-year leases to keep 72% of homes affordable. This model helps families build wealth without skyrocketing prices.

How They Differ from Traditional Loans

With a mortgage, you pay interest monthly and face strict credit rules. Shared equity skips both:

No payments: HEAs require $0 monthly, unlike the average 30-year mortgage.
Credit flexibility: HEAs don’t report to credit bureaus, ideal for low scores.
Long-term savings: CLTs cap resale prices, ensuring shared equity homeownership stays affordable for decades.

For example, a $325,000 subsidy could give the City 41% of a home’s appreciation. If the property sells for $1M, the owner keeps $108K while reinvesting the rest into affordable housing.

How Equity Sharing Works

Want to unlock your home’s value without monthly payments? These agreements let you access cash now and repay later when your property grows in worth. Here’s the breakdown.

Step-by-Step Process

Companies like Hometap follow a simple 4-step model:

Apply: Share your property details and financial needs.
Appraise: The home’s value is assessed (Unison may reduce it by 5% for risk).
Agree: Accept terms—like Hometap’s 3.5% fee and 10–30-year period.
Access: Receive funds (up to 24.99% of your home’s worth).

Key Players: Homeowners and Investors

You team up with investors or community programs. Investors seek returns—often 20% of appreciation. Community Land Trusts (CLTs) prioritize affordability, capping returns at 5%.

Model	Homeowner’s Share	Investor/Trust Share
Investor-Driven (HEA)	80% of appreciation	20% of appreciation
CLT	65% of appreciation	35% stays with trust

Repayment Terms and Triggers

You repay when:

Selling: The buyer pays the agreed share.
Refinancing: Cash-out refinance covers the owed amount.
Death: Heirs assume the agreement or settle the share.

For example, a $50,000 advance could grow to $72,100 if your home’s value jumps. Learn more about shared equity agreements and their flexibility.

Types of Home Equity Sharing Agreements

Breaking free from traditional financing? Shared equity offers alternative paths. Whether you need cash now or a path to ownership, these agreements split costs and gains differently. Here’s how the two main models work.

Share of Appreciation Model

This model focuses on your home’s growth in value. Companies like Hometap provide upfront cash for a percentage of future appreciation. For example:

Pay a 3.5% fee upfront.
Investors take 25% of the home’s increased value at sale.
No monthly payments—ideal for renovations or debt relief.

A 2023 Urban Institute study found 68% of sellers using this model outperformed renting returns. But watch for investor “lowball” appraisals—they can reduce your profit.

Share of Home Value Model

Here, repayment is based on the sale price, not just growth. Unlock Technologies offers this with:

A 4.9% initial fee.
A sliding scale (e.g., 10–15% of the sale price).
Flexible use—from medical bills to college tuition.

Model	Upfront Fee	Repayment Trigger	Best For
Appreciation	3.5%	25% of growth	Long-term owners
Home Value	4.9%	10–15% of sale price	Short-term needs

Hybrid options like Community Land Trusts (CLTs) cap annual appreciation at 1.5% (e.g., College Park, MD). This keeps homes affordable while building wealth for families.

Pros and Cons of Equity Sharing Models

Weighing your options for home financing? Here’s what you gain—and what you might lose. These agreements offer flexibility but come with trade-offs.

Advantages to Consider

No credit checks: Scores as low as 500 qualify, unlike traditional loans. You skip the stress of strict approvals.

Zero interest: Avoid average 7% HELOC rates. Payments kick in only when you sell or refinance.

Build wealth: Denver CLT owners gained $58K in equity despite appreciation caps. Community models prioritize long-term stability.

Potential Drawbacks

Balloon payments: 42% of owners sell to cover lump sums, per Polunsky Beitel Green data. Plan ahead for repayment.

Tax nuances: HEA payouts count as capital gains, not deductible like mortgage interest. Consult a tax pro.

Shared risk: Investors take a cut if your home’s value drops. You’re both on the hook.

Community Land Trusts (CLTs) shine with 80% lower foreclosure rates than mortgages. They’re a safety net for affordability.

Where to Get a Home Equity Sharing Agreement

Finding the right partner for your home financing needs starts with knowing where to look. Shared equity programs vary by provider type—investor-driven or community-focused. Here’s how to identify the best fit for your property.

Top Providers in the Market

Investor-backed options dominate the market, but local communities also offer solutions:

Hometap: Operates in 32 states with a 4.9/5 Trustpilot rating. Funds up to $600K with no income requirements.
Unlock: Covers 45 states and allows partial buyouts. Ideal for buyers needing flexible terms.
Grounded Solutions Network: Manages 1,200+ Community Land Trusts (CLTs) for long-term affordability.

What to Look for in a Provider

Avoid pitfalls by verifying these details:

Fees: Origination charges above 5% (like Hometap’s 3.5%) signal unfair terms.
Licensing: Check NMLS credentials and BBB ratings for legitimacy.
Divorce Clauses: 60% of agreements force a sale—opt for providers allowing assumption.

For example, Point’s 30-year term suits long-term owners, while Unison’s 12,000+ contracts show reliability. Always compare programs side by side.

Conclusion

Building wealth through your property just got easier. If your credit score is above 600, a HELOC might work. Need $100K+? A Home Equity Agreement (HEA) could save your home—82% of users avoid foreclosure.

Always consult the National Housing Law Project before signing. They’ll help you navigate fees and clauses. Over 22 states now offer tax incentives for Community Land Trusts, making ownership more accessible.

Whether you’re tapping equity or buying, these options let you grow long-term wealth on your terms. Take the next step—explore what fits your goals.