HELOC vs. Home Equity Investment: A Side-by-Side Comparison

Tapping into your home's equity used to mean taking out a home equity loan or a home equity line of credit (HELOC). Today, a newer option called a home equity investment — also referred to as a home equity agreement or home equity sharing — gives homeowners another way to access cash, without taking on a monthly payment.

Both a HELOC and a home equity investment let you turn the value you've built in your home into usable cash, but they work in very different ways. If you're weighing your options beyond a HELOC, you’re in the right place. Below are all of the topics we’ll cover:

• What is a HELOC?
• What is a Home Equity Investment?
• HELOC vs. Home Equity Investment at a Glance
• Pros and Cons of a HELOC
• Pros and Cons of a Home Equity Investment
• Costs, Credit Requirements, and Eligibility Criteria to Know
• Which Option Fits Your Situation?
• FAQs

What Is a HELOC?

A home equity line of credit, or HELOC, is a revolving line of credit secured by your home — similar in structure to a credit card. During the "draw" period, which usually lasts about 10 years, you can borrow against your available equity as needed and typically make interest-only payments on the amount you've drawn.

HELOC interest rates are typically variable, and they move with broader market rates. The national average HELOC rate was hovering around 7.26% as of September 2026, though your actual rate depends on your credit profile, loan-to-value ratio, and lender.

Once the draw period ends, you enter the repayment period — typically 15 to 20 years — during which you make monthly payments of principal and interest until the balance is settled. Since a HELOC is a line of credit, every dollar you draw eventually comes with interest attached. For a closer look at how a HELOC differs, see how a home equity loan compares to a HELOC.

What Is a Home Equity Investment?

A home equity investment allows you to access a portion of your home equity in exchange for a share of your home's future value. You receive a lump sum of cash, and there are no monthly payments. Instead, you settle the investment — through a buyout, a refinance, or the sale of your home — any time within the term, which is typically up to 10 years.

Because the settlement amount is tied to your home's value at that time, the investor isn't guaranteed a return. You can read more about how a home equity investment works if you'd like to see the process from application to settlement.

HELOC vs. Home Equity Investment at a Glance

Here's how the two options compare with respect to the factors that matter most to homeowners. Note: the criteria for HEIs vary slightly from one investment provider to another; the following chart is specific to Hometap’s HEI.

*Credit source: Chase Bank

**Investment minimum can vary by state

Tap into your equity with no monthly payments. See if you prequalify for a Hometap investment in seconds.

Pros and Cons of a HELOC

Pros:

• Flexibility to draw only what you need, when you need it
• Interest is paid only on the amount you've drawn, not your full credit limit
• A HELOC can act as a standing safety net for unpredictable expenses, like an emergency fund you can tap for years after opening the line
• Access to a higher share of your equity — often 80–85%, compared to a home equity investment's 27% cap

Cons:

• Variable interest rates mean your payment can fluctuate month to month
• Monthly payments begin as soon as you draw funds, adding to your existing monthly obligations
• Qualification typically depends on verified income and debt-to-income requirements
• Some lenders require a minimum draw, so you may end up borrowing more than you need up front
• Your line of credit can be frozen if your credit score drops

Pros and Cons of a Home Equity Investment

Pros:

• No monthly payments during the term
• No income requirements, making it less stressful for homeowners with non-traditional income sources
• A lump sum that works well for expenses with a fixed cost, like a renovation with a set budget
• No penalty for settling early

Cons:

• Your settlement amount varies based on when you settle and your home’s value at the time of settlement
• Access is capped at 27% of your home's value (up to $600,000) — a smaller share than many HELOCs allow
• Not available in every state or for every property type

If you're also weighing a fixed-rate lump sum loan against an HEI, our comparison home equity loan vs. home equity investment breaks that down in more detail.

Costs, Credit, and Eligibility Requirements to Know

Every way of accessing home equity comes with a cost — and a home equity investment is no exception. Here's what to expect with a Hometap Investment, specifically:

• Fees: Closing costs and fees are deducted from the initial investment amount. These can vary by state. Learn more about what these fees can look like for a Hometap home equity investment.
• Credit score: The minimum FICO score is 575.
• Settlement options: You can settle through a cash buyout, a refinance, a home equity loan, or the sale of your home, any time within your 10-year term.
• Eligible properties: Primary residences may be eligible, as do vacation homes and rental properties, though they’re subject to additional criteria.

Which Option Fits Your Situation?

That’s a question only you can answer — the better fit depends on your goals, your timeline, and how you feel about monthly payments versus sharing a percentage of your home's future value. This is where a financial advisor can also be of assistance, by helping you weigh your circumstances and goals.

A HELOC may make more sense if you:

• Want ongoing access to funds rather than a single lump sum
• Plan to draw and repay relatively quickly
• Want to keep 100% of your home's future appreciation

A home equity investment may make more sense if you:

• Want to avoid adding a new monthly payment
• Have a specific, fixed expense — like debt payoff, a renovation, or a life event — and prefer a lump sum
• Are comfortable settling through a future home sale, loan, refinance, or buyout with savings rather than monthly repayment

Not sure where you land? Take our quiz to see which option tends to fit your goals in about two minutes.

FAQs

What's the difference between a HELOC and a home equity investment, and which makes more sense for different homeowners?

A HELOC is a line of credit— you draw funds, pay interest on what you use, and repay the balance over time. A home equity investment provides a lump sum with no monthly payments, and you settle later based on your home's value and the length of time you’ve kept the investment. Homeowners who want ongoing access to funds and are comfortable with monthly payments often lean toward a HELOC, while those who want to avoid a new payment and have a fixed use for the cash may find a home equity investment is a better fit.

Is a home equity investment or a HELOC better if I want no monthly payment?

A home equity investment doesn't require monthly payments, while a HELOC typically requires at least interest-only payments during the draw period. That said, "no monthly payment" isn't the only factor to weigh — a home equity investment's cost is tied to your home's future value, which could end up higher or lower than the interest you'd pay on a HELOC. It's worth comparing both scenarios for your specific situation rather than assuming one option is automatically better.

For bad credit, is a HELOC or a home equity investment the better option?

Home equity investments generally have lower credit score requirements than HELOCs, with Hometap's minimum FICO around 575, among other qualifying criteria. Many HELOC lenders look for higher credit scores and verified income. That doesn't make one product universally "better" — it means a home equity investment may be more accessible for some homeowners with lower credit scores, while a HELOC could still be worth exploring, depending on the specific lender's requirements.

What home equity investment is recommended if I don't qualify for a HELOC?

There's no one-size-fits-all recommendation, since eligibility depends on your credit, equity, and property. A home equity investment like Hometap's could be worth exploring if a HELOC isn't a fit or isn’t accessible, since it doesn't require income verification and has a lower minimum credit score, among other criteria. Comparing a few providers and scenarios is a good way to find the best fit for your situation.

How do you settle a home equity investment?

You settle a Hometap Investment through a buyout with savings, a loan, a refinance, or the sale of your home, any time within your term.

Could you get a home equity investment on a second home or rental property?

Yes. In addition to primary residences, vacation homes and rental properties could be eligible for a Hometap Investment, subject to additional qualifying criteria.

Find out if a home equity investment is right for you in seconds.