For many homeowners approaching or already in retirement, your home is more than a place to live — it’s one of your largest financial assets. It makes sense that you might want to access some of that equity to improve cash flow, pay off debt, or simply enjoy more peace of mind in retirement.

Two options often come up in these conversations: the Home Equity Conversion Mortgage (HECM) — better known as a reverse mortgage — and a newer product called a Home Equity Investment (HEI).

While both can provide cash using your home’s equity, they operate very differently — and the long-term financial outcomes can be worlds apart.

Let’s break down the key differences, benefits, and risks of each.

What Is a HECM (Reverse Mortgage)?

A Home Equity Conversion Mortgage, or HECM, is a federally insured program designed specifically for homeowners age 62 and older. It allows you to access a portion of your home’s value without selling it, giving up ownership, or making monthly mortgage payments.

With a HECM, the loan balance only becomes due when you permanently move out of the home, sell it, or pass away. As long as you live in the home, maintain it, and pay your property taxes and insurance, you can stay as long as you wish.

Key Benefits of a HECM

✅ You keep the title – The home remains 100% yours.

✅ No monthly mortgage payments – You’re not adding a financial burden to your retirement budget.

✅ Flexible payout options – Choose a lump sum, monthly payments, or a line of credit that grows over time.

✅ Federally insured protection – The FHA guarantees you’ll never owe more than the home’s value, even if the market declines.

✅ Heirs are protected – Your estate can simply sell the home and keep any remaining equity.

The HECM is highly regulated by the Department of Housing and Urban Development (HUD) and includes required counseling to ensure every borrower understands the program before moving forward.

What Is a Home Equity Investment (HEI)?

A Home Equity Investment, or HEI, is a newer financial product offered by private investors. It’s often marketed as a “debt-free” way to unlock your home’s equity.

An HEI gives you cash upfront in exchange for a share of your home’s future appreciation — meaning the investor gets a portion of your home’s value when you sell or refinance, usually within 10–30 years.

Unlike a loan, there are no monthly payments, but the trade-off can be costly.

Risks and Drawbacks of an HEI

🚩 You give up a share of your home’s future value. If your home appreciates, the investor’s cut can far exceed the cash you received.

🚩 No federal insurance or consumer protection. These are private contracts with minimal regulation.

🚩 Limited flexibility. If you move, refinance, or pass away before the contract ends, repayment can be triggered early — often with significant penalties or fees.

🚩 High effective cost. In many cases, homeowners end up paying two to three times what they initially received once appreciation is factored in.

In short, while HEIs may sound simple, they can be one of the most expensive ways to access your home’s equity.

Example: How the Costs Add Up

Imagine your home is worth $500,000 and you receive $100,000 through an HEI.

If your home’s value rises to $800,000 ten years later, the investor may be entitled to 20–30% of the appreciation — roughly $60,000–$90,000 or more.

That means you could owe close to $200,000 back on the original $100,000 you received.

By contrast, with a HECM, the appreciation is yours to keep — not an investor’s profit.

HECM vs. HEI: Side-by-Side Comparison

The Bottom Line

The HECM is a government-backed program built to help seniors safely access home equity. It provides flexibility, protection, and peace of mind — without sacrificing your home’s future value.

The HEI, on the other hand, may look appealing because it’s marketed as “no debt” or “no payments.” But in reality, it can cost far more than a traditional reverse mortgage and expose you to risks that aren’t easy to see upfront.

When your home represents a lifetime of hard work, it’s crucial to choose a path that keeps your ownership, control, and financial security intact.

Let’s Talk About Your Options

If you’re exploring ways to access your home’s equity in retirement, I’d love to help you understand your options clearly and confidently.

As a Reverse Mortgage Advisor, my goal is to help you make informed decisions that protect your financial future — and your home.

📞 Contact me today to schedule a free, no-obligation consultation.

Let’s make sure your equity works for you, not against you.