A home equity agreement has no monthly payment, so the cost shows up at the end. Type the terms from your own offer and this shows roughly what settling would cost. The numbers in the boxes are an example, not any company’s terms: $50,000 on a $500,000 home settles for about $120,952 after 10 years.
The numbers in the boxes are examples to show how it works. They aren’t a quote, a current market rate or any lender’s terms, so swap in your own.
What your result means
Your settlement amount is what the company’s share would be worth when you settle. Implied annual cost turns that into a yearly rate, so you can set it next to a loan.
It’s a comparison tool, not an APR.
Your home drives the cost. Run the example at 0% growth and it settles for $90,000, about 6.1% a year. At 6% growth it’s $161,176, about 12.4% a year.
What it leaves out
Many agreements cap what you can owe, and the cap would lower the result. It also skips costs at closing, how your home’s value is set at settlement, any adjustment for improvements you make and what happens if you settle early or can’t settle at the end of the term. Your contract decides all of that.
What to check with the company
Ask for the multiple, the cap, the term, how the settlement value is set and every cost at closing. Ask what happens if you sell, refinance or can’t settle. Then type their numbers in here, and run a flat and a falling home value too.
How this is calculated
Cash as a share of value is the cash you receive divided by your home value today. Your multiple turns that into the company’s share, so 10% received at a 1.8 multiple is 18%. This calculator caps the share at 100%.
Home value at settlement is today’s value grown by your yearly change, compounded for the years you enter. Multiply the share by that future value and you get the settlement amount. Divide the settlement amount by the cash you received, raise it to the power of 1 divided by the years, subtract 1, and that’s the implied annual cost.
Amounts are rounded to the nearest dollar and percentages to one decimal. Cash received is capped at half the home value, the multiple runs from 0 to 5, the yearly change from minus 10% to 20% and the years from 1 to 30. Anything outside that moves to the nearest allowed number, and you’ll see a note saying so. This is one common way to structure an agreement. Yours may differ, so follow the formula in your contract.
Home equity agreement calculator questions
Some agreements set the company’s share as a multiple of the percentage of your home’s value you receive. Receive 10% of the value at a 1.8 multiple and the share is 18%. Your offer states its own multiple, so type that one in.
Because the company’s share applies to your home’s value at settlement, not to the cash you started with. A bigger value means a bigger settlement, which is why the annual cost jumps in a hot market.
No. An APR is a defined measure for loans. This is a simple yearly growth rate from the cash you received to the settlement amount, based on a value you had to guess. Use it to compare, not to quote.
Weighing an agreement against a loan? HEI vs HELOC compares them. Two of the best known are covered in Hometap vs Point. See our best home equity agreement companies, then browse the rest of our home equity guides. If you also want payments on a loan, try the HELOC payment calculator.