Home Equity Agreement in Florida: Selling a Share of Your Future Appreciation
A home equity agreement Florida homeowners are offered pays cash now for a share of the home's future value. No payments, no interest, and a settlement that can cost far more than a loan. Read the cap.
Educational content only. This article is for informational purposes and does not constitute financial, legal, or lending advice. Loan programs, rates, and eligibility requirements change frequently. Consult a licensed mortgage professional before making any borrowing decision. Mortgage Capital | NMLS# 1859012 | Licensed in Florida.
A home equity agreement Florida homeowners are pitched pays cash today in exchange for a percentage of the home's value when you sell or settle.
No monthly payments and no interest, and a settlement that can cost more than any loan if the home appreciates. Our guide to HELOC versus home equity loans in Florida covers the loan alternatives.
How it works
An investor gives you a lump sum, often 10 to 20 percent of the home's value.
In exchange, they receive a larger percentage of the home's value at settlement, often two to three times their stake.
Settlement happens at sale, refinance or the end of the term, usually ten to thirty years.
The CFPB has examined these products and their risks.
A lien is recorded.
Why people take them
No income or credit qualification in many cases.
No monthly payment.
See our guide to refinancing with bad credit in Florida.
Retirees, self-employed owners and those who cannot get a HELOC.
Cash without a payment is the pitch.
The cost
If the home appreciates, the investor's share grows with it.
On a Florida home that gains value over a decade, the payoff can equal a loan at a very high rate.
Some agreements cap the investor's return; many cap it generously.
The starting value is often set at a discount, which raises the investor's share further.
Read the cap and the starting value.
Compared to a HELOC
A HELOC has a payment and a rate; the cost is known.
See our guide to cash-out versus HELOC in Florida.
An equity agreement has no payment and an unknown cost.
For a homeowner who qualifies for a HELOC, the HELOC is almost always cheaper.
The agreement is for those who cannot.
Compared to a reverse mortgage
A reverse mortgage for owners 62 and over has no payment and a known accrual.
See our guide to reverse mortgage requirements in Florida.
Non-recourse and FHA-insured.
The equity agreement has no age requirement and no insurance.
Older owners should compare both.
Lenders and the lien
The agreement records as a lien, usually in second position.
See our guide to second mortgages in Florida.
A future refinance must pay it off or subordinate it.
Most agreements do not subordinate.
That can block a rate-and-term refinance for the whole term.
Settlement triggers
Sale, refinance, death, default on the first mortgage, or the term end.
Some agreements require an appraisal at settlement, paid by you.
Disputes over value are common.
See our guide to mortgage payoff letters in Florida.
The payoff can surprise the title company.
Florida homestead
Florida's homestead protection restricts liens on a homestead to mortgages, taxes and labour.
Equity agreements are structured to fit or to avoid the question.
A spouse must join in any lien on the homestead.
See our guide to the Florida homestead exemption.
An attorney should review the document under Florida law.
Regulation
Equity agreements are not regulated as mortgages in most states, including Florida at this writing.
No Truth in Lending disclosures, no APR, no rescission period in many cases.
See our guide to the right of rescission in Florida for what a loan would give you.
Some states have begun regulating them.
Read every page.
Improvements
Value you add through renovation is shared with the investor at settlement.
Some agreements adjust for documented improvements; many do not.
See our guide to roof replacement financing in Florida.
A new roof you paid for raises their share.
Ask how improvements are treated.
Depreciation
If the home loses value, the investor shares the loss in most agreements.
That is the fairness argument.
Florida's recent history is appreciation.
Bet on the likely case.
The downside protection is real but rarely used.
Taxes
The upfront cash is generally not income.
The settlement affects your basis and gain calculation at sale.
See our guide to capital gains on a primary residence in Florida.
A tax adviser models it.
The rules are unsettled.
Selling with one
The investor's share comes off the top at closing.
See our guide to what happens at closing in Florida.
Order the payoff early; it takes longer than a mortgage payoff.
Disputes over the appraisal delay closings.
Disclose it to your agent at listing.
Who it might fit
An owner who cannot qualify for any loan, needs cash, expects flat values, and plans to sell within a few years.
That is a narrow profile.
Most Florida owners fit a HELOC, a home equity loan or a reverse mortgage better.
See our guide to portfolio loans in Florida for lenders who work with hard files.
Exhaust the loans first.
Questions to ask
What is the starting value and the discount applied?
What percentage of value do you receive at settlement, and is it capped?
What triggers settlement, and who pays the appraisal?
Will you subordinate to a refinance?
How are improvements treated?
Where to start
Apply for a HELOC or home equity loan first, including with portfolio lenders.
If declined everywhere, have a Florida attorney read the agreement before signing.
Then start a conversation and we will look for a loan that fits before you sell a share of your home.