Home Equity Agreements (HEAs) are a powerful tool for mortgage professionals looking to expand their service offerings. By adding HEAs to your portfolio, you can help clients who don’t qualify for traditional financing options access their home equity and improve their financial situation—without taking on new debt.

Offer homeowners a solution to access their home equity without monthly payments or interest. Whether your clients have a low credit score, high debt-to-income ratio, or hard-to-verify income, HEAs provide a flexible way to access funds without the burden of additional loans.

A Home Equity Agreement (HEA) lets homeowners access their home equity without taking on traditional debt, monthly payments, or interest. Instead, the homeowner receives a lump sum of cash in exchange for a share of the home’s future value. The investor receives this share when the agreement is settled, which can occur when they sell their the home, by consolidating and refinancing with traditional debt, or reach the end of the term, which is typically 10 years.

Let’s break it down using an example:

Homeowner Receives a Lump Sum Upfront:

The homeowner gets an upfront cash payment. In this case, let’s say the home is valued at $1,000,000, and the homeowner receives $100,000 in exchange for a 20% share of the home’s future value.

No Monthly Payments or Interest:

Unlike a loan or mortgage, there are no monthly payments or interest charges. Nothing is owed until the agreement is settled.

How the Investor Benefits:

The amount the homeowner receives upfront is a discount on the value of the equity the investor receives. In exchange for giving the homeowner $100,000, which is 10% of the home's current value, the investor receives a 20% share of the home’s future value. The investor's return could be worth more or less, depending on the home’s market value when the agreement is settled.

Settlement:

When the homeowner eventually settles the agreement, they repay the investor based on the home’s value at that time. If the home appreciates to $1,200,000, the investor's 20% share would be $240,000. If the home’s value decreases to $800,000, the investor's share would be $160,000.

Example Recap:

If the home is worth $1,000,000 and they receive $100,000 upfront, they are agreeing to give the investor a 20% share of the home’s future value. If the home increases in value to $1,200,000, the investor's share would be worth $240,000. If the home’s value decreases to $800,000, their share would be $160,000.

In this example, the homeowner gains access to cash without monthly payments or interest, while the investor shares in both the potential increase and decrease in the home’s value.

Initial Application: How clients can apply for an HEA with flexible requirements.

Valuation and Offer: Walk through how property valuation works and how the offer is determined.

Receiving Funds: Explain how clients receive funds and what they can expect in terms of timelines.

Settlement Options: Detail how the agreement is settled upon the sale of the property or other triggers.

One of the biggest reasons homeowners turn to Home Equity Agreements (HEAs) is that they allow access to home equity without taking on additional debt or monthly payments. Unlike traditional loans or lines of credit, HEAs don’t require interest payments, making them an attractive option for clients who are debt-averse or simply looking for a more flexible solution.

Flexible Qualification for a Variety of Situations

HEAs offer more flexibility compared to traditional home equity products. This makes them ideal for clients who might face challenges with other types of financing, such as:

Credit-Challenged Homeowners: Low credit score? No problem. HEAs offer solutions for those who may not qualify for loans or HELOCs due to credit issues. Help your clients reduce high-interest credit card debt and improve their financial standing without monthly payments.

Self-Employed and Small Business Owners: For clients with hard-to-verify income, HEAs provide an alternative that doesn’t rely on traditional income verification.

High Debt-to-Income Ratio: Clients with high debt-to-income ratios may struggle to secure traditional financing, but HEAs focus on home equity, not income or debt levels.

HEA Qualification Calculator: Provide a simple tool for mortgage professionals to estimate how much equity a client could access through an HEA.

Client Education Resources: Downloadable brochures, e-books, and videos that mortgage professionals can share with their clients.

FAQs for Mortgage Professionals: Answer common questions about HEAs, including how they compare to traditional equity products and how they can be a valuable addition to a mortgage professional’s portfolio.

HEA Pre-Qualification Calculator: Provide a simple tool for mortgage professionals to estimate how much equity a client could access through an HEA.

Marketing Toolkit: Downloadable brochures, e-books, and videos that can be shared with clients. Co-branded marketing materials, including brochures, e-books, and videos, social media posts, and email templates, that can be used to promote HEAs to clients. Pre-made presentations that mortgage professionals can use to introduce HEAs during client meetings

FAQs for Mortgage Professionals: Answer common questions about HEAs, including how they compare to traditional equity products and how they can be a valuable addition to a mortgage professional’s portfolio.

Partnering with Us: Partner with MEND2LEND to offer HEAs and gain access to exclusive resources, training, and support. Mortgage professionals will now be able to meet the needs of a greater number homeowners and help them better access and manager their home equity.