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It is a broad belief in American life. It’s difficult to become a homeowner, but when you get home at the door, there are few economic challenges that renters often suffer from.
It’s not that fast.
Yes, homeownership often represents a much more stable cost of living than renting, but at the age of rising insurance costs and property taxes, the trade-offs are less clear. And many Americans would agree with all other prices, From eggs to medical costs, it appears to grow weekly.
That includes home prices. The home value has increased by about 50% over five years, with households remaining $35 trillion in stock. Of that amount, homeowners who have a mortgage have $11 trillion in “tapable equity” as of the start of 2025, according to the ICE Mortgage Monitor.
Anyone who knows the feeling of a wealth of homes but poor cash probably knows the uncertainty of navigating options to fill these two realities.
Noelle Melton, vice president of the National Homeowners Program and vice president of lending at the national nonprofit Neighborworks America, says that many of the financial products that homeowners can use, from mortgages to reverse mortgages, are available for a long time.
But it’s important to understand the financial products homeowners have, their strengths and weaknesses, and how they fit into their individual financial plans, Melton added.
“People often don’t consider themselves as possessing assets,” she said. “They’re focused on coming up with ways to bring together the pieces to achieve their goals. But everyone can benefit from having an unbiased guide to advise them on a bigger picture of how this will affect their long-term financial health.”
Bank products for tapping Home Equity
The most well-known way to convert stocks into cash is through loan products offered by banks and other lenders.
Home equity loans offer lump sum payments at a constant interest rate, although not usually constant. Home Equity Credit Lines can be set to a certain maximum amount that can be borrowed and repayed before borrowing again. HELOCs usually have variable interest rates.
With cash-out refinance, you will take out more new mortgages than you currently owe, then pocket the difference as cash. Reverse mortgages, available only to homeowners over the age of 62, act in the opposite way traditional mortgages do. The lender pays a certain amount to the homeowner each month or as a one-time lump sum.
To be approved for any of these products, borrowers need a strong credit profile and willingness and ability to undertake more debt. There are other drawbacks too. Reverse mortgages cost a wide range of fees. There is also always concern that homeowners may live longer than the cash provided by their products and lose the fairness to settle.
Similarly, according to Bankrate, home equity loans and credit lines tend to have high interest rates. The cash-out refinance rate is a bit better. At the time of writing, it is in the 6% range, but more than half of homeowners with mortgages were under 4% at the end of 2024.
Home Equity Shared Agreement
For all these reasons, debt products are not suitable for many homeowners. Jeff Glass has founded Hometap, one of several companies that also offer what is called “home equity investments” or “home equity sharing agreements.”
“For a lot of people, the idea of having to borrow more doesn’t work,” Glass told USA Today. “And the idea that we have to sell it all seemed like it was too binary to us. So we created a third option, this idea to sell some of it.”
What that really means is that you provide your home interests to a company like Hometap in advance in exchange for cash. If you sell your property or close a contract with the company, you will repay some of the valued value and fees of the home, in addition to the initial cash you received.
However, home equity investments make many consumer advocates very unsettling.
Sharon Cornelissen, director of housing for the American Federation of Nonprofit Consumers, says there is often a “disparity” between the way products are sold to consumers and what ends the payment.
Cornelissen points to a Consumer Financial Protection Bureau study that found homeowners using share-sharing agreements tend to pay interest rates close to 20%.
“They are offering solutions to consumers who may not have other options,” Cornelissen said. “I don’t support the product.”
Glass agrees. “Most of the time, loans turn out to be cheaper in retrospect,” he said.. “So if someone has incremental cash flow to help with that loan and they have to be stressed about it or make meaningful compromises that affect the quality of life, I would say it means a lot for Hellock or some sort of cash out refinance.”
But Glass said the number one reason most homeowners go to Hometap is to pay off their debt or bills and repair their credits. Other types of homeowners may appear to be fraudulent borrowers, including small business owners, retirees, or freelancers with unstable incomes. In other words, they may not have the luxury of cheap products.
How to Choose the Best Home Equity Products for You
With all the options available, one of the best ways to know what’s right for you is to seek unbiased third-party help. A financial advisor may be able to help you: even if you don’t normally work alone, you can find “advice only” experts that you may charge on time or project to assess your choices.
HUD approved housing counselors are like NeighboryWorks America. Counselors may be well known for their help to help more marginal borrowers become homeowners, but Melton says that no matter what questions an owner asks, it can be used throughout the home ownership cycle. Consultations are usually free or available at nominal fees.
If you have flexibility and credit profiles and think products like home equity loans and credit lines are right for you, understand the terms and conditions. Remember that entering a new mortgage through cash-out refinance may mean that you have started paying off your principal again. If you have a home equity loan or credit line, check if your interest rate is adjustable.
On the other hand, if you are considering participating in a home equity sharing agreement or investment with companies such as Hometap, Unlock, Point, etc., don’t feel like you’re in a hurry to anything. If you are working with a financial advisor or counselor, please ask that you review the documents you have from the company.
CFPB also keep that possibility in mind as some customers have discovered unexpected issues with refinancing an existing mortgage if their existing mortgage invests in home equity.
Finally, Cornelissen urges anyone with a home equity sharing company to report quickly to regulators like the CFPB and the Attorney General. This allows authorities to better understand and regulate the industry. Glass says he and his counterparts are welcome.
