How shared equity works
With a shared equity agreement, sometimes called a home equity investment, a company pays you a lump sum. In return, it gets a share of your home's value, or of its future gain, when the agreement ends.
You keep living in the home and owning it. You settle up when you sell, refinance, buy out the investor, or reach the end of the term, often ten years or more.
How a home equity loan works
A home equity loan is a second mortgage. You borrow a lump sum and repay it with interest over a set term. With CapCenter, the rate is fixed and the term is 15, 20 or 30 years, so your principal and interest payment stays the same.
Your cost is set when you close. It doesn't depend on what happens to home prices.
What each can really cost
A shared equity agreement can look cheap because there's no payment. But if your home gains a lot of value, the investor's share can grow well beyond the cash you received. Fees and adjustments in the contract can add to that.
If home values stay flat or fall, shared equity may cost less. You're trading certainty for a bet on the market.
Side by side
- Home equity loan: monthly payment, fixed rate, known total cost
- Shared equity: no monthly payment, cost depends on your home's future value
- Home equity loan: you keep all future gains in your home's value
- Shared equity: you give up a share of future value
- Both: your home is tied to the deal until it's settled
Questions to ask before signing
- How is my home's starting value set, and by whom?
- What share do I give up, and is there a cap on the investor's return?
- What fees come out up front or at the end?
- What happens if I need to sell early, or can't pay at the end of the term?
- What upkeep and insurance does the contract require?
Which may fit you
Shared equity can appeal if you can't qualify for a payment or you expect values to stay flat. A home equity loan often makes more sense if you have steady income and want a known cost. You need a credit score of at least 620 for a CapCenter loan, and a loan consultant can tell you the most you can borrow for your loan type and purpose.
