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Home Equity Investment vs HELOC: What "No Monthly Payment" Costs

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A home equity investment gives you cash now with no monthly payment. In return, the company takes a share of your home's value and collects it in one lump sum when you sell or when the contract ends, often 10 to 30 years later. A HELOC is a line of credit you repay monthly with interest. Both are secured by your home. The CFPB's 2025 review found home equity investments (it calls them home equity contracts) "are expensive compared to other home-secured financing options," and in its own worked example the contract cost more than a HELOC over 10 years unless the home lost value. This page compares the two on cost, risk and who each one fits, using CFPB, court and state regulator sources checked on October 26, 2026.

Partner disclosure. Loans Generator may be paid through an affiliate network when you click or submit a request; this does not change what we report.

Key takeaways

  • Both options put a lien on your home. A HELOC you cannot repay can lead to foreclosure; a home equity investment you cannot pay off at the end of the term can force a sale.
  • In the CFPB's example, $50,000 from a home equity contract cost $94,074 to $215,892 to settle after 10 years, against $95,000 in total payments on a $50,000 interest-only HELOC at 9%.
  • The contract was cheaper only if the home lost at least 5% of its value. It also carried a 4% fee ($2,000) plus $2,000 in third-party costs that the comparison leaves out.
  • The CFPB says home equity contracts are often marketed with "no monthly payments" and "no interest" to homeowners with no income and low credit scores.
  • In June 2026 Unlock settled with Colorado's consumer credit administrator: it agreed to follow the state's consumer credit code, including its rate caps, and to make payments to homeowners charged above them, while denying liability and denying that its agreements are consumer credit.

This page is part of our guide to home equity loans, HELOCs and refinancing.

How do a home equity investment and a HELOC differ?

Home equity investment (home equity contract)HELOC
What you getA lump sum upfrontA credit line you draw from as needed
Monthly paymentNone to the companyYes; often interest-only during the draw period, then principal and interest
What you repayA share of the home's value (or of its change in value), subject to any cap, in one paymentWhat you borrowed plus interest
When it is dueAt sale, at the end of the term (often 10 to 30 years), or another triggering eventMonthly; the balance is due by the end of the repayment period
Upfront costsProcessing fees "often 3-5% of the initial payment," per the CFPB, plus third-party costsApplication, appraisal and closing fees vary by lender
Secured by your homeYes: the company "secures their interest with a lien on the property"Yes: if you cannot repay, you could lose your home
QualifyingMarketed as available with no income and low credit scoresCredit, income, debt-to-income and equity checks
Taxes and insuranceYou still pay themYou still pay them

Sources: CFPB Issue Spotlight on home equity contracts (January 15, 2025) and CFPB HELOC resources, accessed October 26, 2026.

How does the cost compare over 10 years?

The CFPB worked through one example. Its assumptions, quoted from the report:

Total paid over 10 years on 50,000 dollars, CFPB example: HELOC 95,000 dollars; home equity contract 94,074 dollars if the home falls 30 percent then grows 3 percent a year, 100,000 dollars if the value is flat, 179,085 dollars at 6 percent a year growth, 215,892 dollars at 8 percent a year growth Total paid over 10 years on $50,000 (CFPB) HELOC, 9%$95,000 HEI, crash$94,074 HEI, flat value$100,000 HEI, +6% a year$179,085 HEI, +8% a year$215,892 HEI amounts exclude the 4% fee and $2,000 in third-party costs. HELOC: interest plus principal.

Figure: CFPB Issue Spotlight, "Home Equity Contracts: Market Overview," January 15, 2025. Home equity investment (HEI) repayment is 20% of the home's value in year 10. "Crash" means the home falls 30% at once, then grows 3% a year. The $100,000 flat-value figure is our calculation from the CFPB's stated terms (20% of $500,000); the others are the CFPB's. The CFPB's narrative gives $81,149 for the crash scenario at year 10; under its stated terms that is the year 5 amount, and we use $94,074, which matches those terms and the low end of the CFPB's stated range. An illustration, not an offer.

The HELOC side of the example, in full: payments of $375 a month for months 1 to 120 (interest only), which adds up to $45,000 in interest, with the original $50,000 still owed at year 10. The CFPB notes that if the balance were then repaid over 20 years, the payment would rise to about $450 a month for months 121 to 360. The example holds the rate at 9% for simplicity; HELOC rates are usually variable, so real payments can rise or fall. Taxes and insurance are not included in either side. These are the CFPB's hypothetical figures, not the rate, payment or terms of any HELOC offered through this page or the link below.

Read the result carefully. The home equity contract cost about the same as the HELOC only in the crash scenario. With a flat home value it cost $100,000 against $95,000, and with steady 6% or 8% growth it cost nearly twice as much or more. The CFPB adds that the contract's origination fees "are typically much higher" than a HELOC's, and its example homeowner would lose $4,000 of the $50,000 to fees and costs: a 4% transaction fee of $2,000 plus $2,000 in third-party fees.

What the CFPB example also shows is the trade-off in the other direction: the HELOC requires $375 every month for 10 years. A homeowner who cannot carry that payment does not get the HELOC's lower total cost. The CFPB notes that "a consumer may turn to a home equity contract after getting denied for a HELOC or cash-out refinance."

What are the risks of a home equity investment?

You may have to sell to pay it off. The whole repayment comes due at once. The CFPB reviewed 38 consumer complaints about these contracts and reported "surprise at the size of the repayment amounts," disputes about home valuations, trouble refinancing the first mortgage, and "frustration that they saw their only option was to sell their property."

The lien can block refinancing. The company records a lien, "potentially limiting the homeowner's ability to refinance their primary mortgage or take out new debt," per the CFPB.

The cost is hard to see in advance. The final amount depends on the home's future value, the company's appraisal and any cap. The CFPB found "non-standardized disclosures" across companies.

Regulators disagree about whether they are credit. In January 2025 the CFPB filed an amicus brief in Roberts v. Unlock Partnership Solutions AOI, Inc. (D.N.J.), arguing that a home equity contract is a residential mortgage loan under the Truth in Lending Act. In 2025 the CFPB asked to withdraw that brief. The court allowed it because the brief no longer represented the agency's position. Colorado's regulator treated these agreements as loans: on June 24, 2026, the state's attorney general announced a settlement with Unlock Partnership Solutions. In the signed Assurance of Discontinuance (dated June 22, 2026), the state's consumer credit administrator alleged that Unlock's home equity agreements are loans under Colorado's Uniform Consumer Credit Code. Unlock "denies any and all liability" and "specifically denies that HEAs are consumer credit transactions under the UCCC," but agreed to comply with that code, including its rate caps, disclosures and licensing, and to make payments to consumers charged above the caps. The signed agreement puts those payments at "$390,783, to 167 consumers"; the attorney general's press release gave $283,375 owed to 125 consumers. Unlock also agreed to pay $37,500 to the attorney general's office.

Complaint counts are small but real. The CFPB complaint database listed these all-time totals on October 26, 2026 for the four companies the CFPB reviewed in its report: Point Digital Finance 56, Hometap Equity Partners 34, Unlock Technologies 31 and Real Estate Equity Exchange (Unison) 15. A smaller company, Splitero, had 6. The industry is small, the counts are not adjusted for size, and a complaint is the consumer's account, not a finding.

What are the risks of a HELOC?

For a HELOC on your principal home, federal law (12 CFR 1026.15) generally lets you cancel until midnight of the third business day after the account opens, or after you receive the required notice and disclosures if that is later, and the lender must return the fees you paid. That protection does not remove the risks below.

A HELOC carries a monthly obligation and a direct foreclosure risk. The CFPB: "If you fall behind or can't repay the loan on schedule, you could lose your home." Rates are usually variable, and when interest-only draws end, the payment can jump; in the CFPB example above it rises from $375 to about $450. Lenders can also freeze or reduce a line in some circumstances. How default and foreclosure work on a HELOC is covered in can you lose your home with a HELOC.

On taxes, the IRS allows a deduction for home equity interest only when the money is used to "buy, build, or substantially improve" the home that secures it. A home equity investment has no interest to deduct.

Which one fits your situation?

A HELOC is usually the cheaper choice if:

A home equity investment may be the only option, at a high price, if:

Neither may fit if:

Questions to ask a home equity investment company

  1. What percentage of my home's value, or of its change in value, do you receive?
  2. What is the annual return cap, and what will I owe at years 3, 5 and 10 if my home value is flat, up 5% a year, or down 20%?
  3. What are the origination fee and third-party costs in dollars?
  4. Who sets the home's value at the start and at the end, and how can I dispute it?
  5. Can I make partial payments, and can I refinance my first mortgage with your lien in place?
  6. Are you licensed as a lender in my state?

Comparing lenders. The comparison service below lists HELOC lenders and, on the same page, home equity investment companies. Loans Generator may be paid through an affiliate network when you click or submit a request; this does not change what we report. Both products are secured by your home: you could lose your home if you cannot repay a HELOC, and you may need to sell to settle a home equity investment. No company has to approve you, and no rate, amount or approval is promised. Our SuperMoney review explains how its rankings work.

Compare HELOC lendersOpens an offer page through our affiliate network.

Common questions

Is a home equity investment a loan?

The companies say no. The CFPB argued in a January 2025 court brief that one company's contract was a mortgage loan under the Truth in Lending Act, then withdrew that brief later in 2025. In Colorado, Unlock settled by agreeing to follow the state's consumer credit code, while denying liability and denying that its agreements are consumer credit.

Is a home equity investment cheaper than a HELOC?

Usually not. In the CFPB's 10-year example, the contract cost more than a 9% interest-only HELOC unless the home lost at least 5% of its value, and that is before the contract's higher fees.

Can I lose my home with a home equity investment?

The company holds a lien on your home, and the full repayment is due at the end of the term or when you sell. Consumers told the CFPB that selling the home felt like their only way to repay.

Do home equity investments have monthly payments?

No. You owe nothing monthly to the company, but you still pay your mortgage, property taxes and insurance, and you owe one large payment later.

Why would anyone choose a home equity investment?

The CFPB notes some homeowners turn to one after being denied a HELOC or cash-out refinance, because these contracts are marketed to people with low credit scores or no income. Model the total cost before signing.

Sources

Source links:

Loans Generator is not a lender or mortgage broker and does not make credit decisions. Links on this page lead to third-party sites with their own terms and privacy policies. We cannot guarantee approval, rates or terms. A HELOC or home equity investment is secured by your home; you could lose your home if you do not repay a HELOC, and you may need to sell to settle a home equity investment. Figures cited here were checked on October 26, 2026. This page is general information, not legal, tax or financial advice.

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