HEI vs. Reverse Mortgage: Side-by-Side Comparison

Before diving into the details, here is the full comparison. These two products solve the same problem (accessing home equity without monthly payments) in fundamentally different ways.

What Is a Home Equity Investment?

A home equity investment is not a loan. Instead, an HEI company gives you a lump sum of cash today in exchange for a percentage of your home's future value when you eventually sell, refinance, or reach the end of the agreement term. There are no monthly payments and no interest charges. The investor profits only if your home appreciates.

Here is how it works in practice: if you receive $50,000 from an HEI provider and they take a 15% equity share on a $400,000 home, you owe them their original investment plus 15% of any appreciation when you settle. If your home rises to $500,000 over 8 years, the $100,000 gain means you owe $50,000 (original) plus $15,000 (15% of the $100,000 gain), totaling $65,000. If the home does not appreciate, many providers cap your downside, though terms vary.

The catch: equity share percentages vary widely. Hometap typically takes 15-20% of appreciation. Unlock charges roughly 2x the equity borrowed, while Unison charges about 1.5x. These differences compound significantly over time, so the specific provider and contract terms matter as much as the product category.

HEI Pros and Cons

What Is a Reverse Mortgage (HECM)?

A Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage. It is FHA-insured, available to homeowners aged 62 and older, and allows you to convert home equity into cash without selling. You can receive funds as a lump sum, a line of credit, monthly payments, or a combination.

The loan balance grows over time because interest and mortgage insurance premiums accrue on the outstanding amount. You do not make monthly payments. The full balance becomes due when you sell the home, move out permanently, or pass away. The FHA guarantee means you (or your heirs) will never owe more than the home is worth at the time of sale, even if the loan balance exceeds that amount.

In 2026, the FHA lending limit for HECMs is $1,249,125. To qualify, you must complete HUD-approved counseling, maintain the home as your primary residence, and stay current on property taxes, homeowner's insurance, and HOA fees.

Reverse Mortgage Pros and Cons

True Cost Comparison: HEI vs. Reverse Mortgage

The total cost of each product depends entirely on how much your home appreciates and how long you hold the agreement. Here is a realistic scenario using a $400,000 home with 3% annual appreciation:

The key takeaway: HEIs tend to be cheaper in moderate-appreciation markets (under 4% annually) and shorter time horizons. Reverse mortgages become relatively more expensive the longer you hold them because of compounding interest, but they offer guaranteed non-recourse protection and do not force a settlement deadline.

Top HEI Providers in 2026

The HEI market has matured significantly. Here are the leading providers, what sets each apart, and what to watch for in their contracts.

Splitero

Best for: Fastest funding and flexible terms. Splitero offers pre-approval in 1-2 business days and has processed over $283 million in transactions. Their equity share terms are competitive, and they are transparent about settlement mechanics. Splitero works well for homeowners in high-value markets (California, Texas, Florida) who need cash quickly without taking on debt. Available in select states.

Hometap

Best for: Moderate equity needs with competitive share rates. Hometap raised $50 million in late 2025 and typically takes a 15-20% equity share. They offer investments up to $600,000 with a 10-year settlement term. Their process is straightforward, and they provide a clear breakdown of what you will owe at different appreciation levels before you commit.

Unlock

Best for: Homeowners who want flexibility in how they use funds. Unlock's model charges approximately 2x the equity borrowed, which means you should run the math carefully against other providers. Pre-approval is quick, and they operate in multiple states. Their terms are longer (up to 30 years in some cases), giving you more time before settlement.

Point

Best for: Large investments backed by institutional capital. Point secured a $2 billion commitment from Blue Owl Capital in late 2025, signaling strong financial backing. They handle larger investment amounts and work well for homeowners with significant equity. Review their specific share structure closely, as the multiplier model differs from percentage-of-appreciation providers.

Unison

Best for: Lower equity share costs (1.5x model). Unison has one of the more favorable share structures at roughly 1.5x the borrowed amount. Their terms extend up to 30 years, and the lower multiplier means less total cost if your home appreciates significantly. They have been in the market longer than most competitors, which provides more track record data.

Who Qualifies for Each Option

Eligibility is one of the biggest differentiators between these two products.

HEI Eligibility

There is no age requirement for a home equity investment. Most providers require at least 25-30% equity in your home, a minimum property value (typically $200,000-$300,000), and the home must be your primary residence. Credit requirements are generally less strict than traditional mortgages because the investment is secured by your home's value, not your ability to repay monthly. Processing time is fast: most providers offer pre-approval in 1-2 business days and funding within 2-4 weeks.

Reverse Mortgage (HECM) Eligibility

You must be at least 62 years old. If you have a spouse, they must also be listed on the loan (if not, they risk losing the home after your death, though recent rule changes offer some protections). You must own your home outright or have a low remaining mortgage balance that the reverse mortgage can pay off. HUD-approved counseling is mandatory before closing. The home must be your primary residence, and you must demonstrate the financial ability to maintain property taxes, insurance, and upkeep. Processing typically takes 30-45 days, partly because of the required counseling step.

Tax Implications You Need to Know

Tax treatment is a critical and often overlooked difference between these products.

HEI tax treatment: The initial cash you receive is not taxable income. However, when you settle, the investor's payout reduces your capital gains basis on the home sale. HEI costs are generally not tax-deductible because an HEI is not classified as a mortgage or loan. This means you lose the mortgage interest deduction that comes with alternatives like HELOCs.

Reverse mortgage tax treatment: Proceeds are not taxable income (they are classified as loan advances). Starting in 2026, interest paid on home equity debt up to $100,000 is tax-deductible, which was reinstated after the 2018-2025 restriction under the Tax Cuts and Jobs Act. This deduction applies when the loan is repaid, which for most HECM borrowers happens at the time of sale.

For homeowners in high tax brackets, the deductibility of reverse mortgage interest can meaningfully reduce the effective cost compared to an HEI, where no portion of the equity share is deductible.

Which Should You Choose? Decision Framework

Use these conditional guidelines based on your specific situation:

Choose an HEI if: You are under 62 and cannot qualify for a reverse mortgage. You need $25,000-$150,000 and plan to sell or refinance within 10 years. Your home is in a market with moderate appreciation (under 4% annually), which keeps your equity share cost manageable. You want to avoid debt entirely and do not want interest accruing on a balance.

Choose a reverse mortgage if: You are 62 or older and plan to stay in your home indefinitely. You need a larger payout ($200,000+) or want ongoing monthly income rather than a lump sum. You value the FHA non-recourse guarantee and the regulatory protections that come with a government-insured product. You are not planning to leave maximum equity to heirs.

Consider neither if: You qualify for a HELOC or cash-out refinance at a competitive rate. Traditional home equity loans almost always cost less than both HEIs and reverse mortgages when you can manage monthly payments. A HELOC at 7-8% with monthly payments will typically leave you with more equity than either option over any time horizon. Only turn to HEIs or reverse mortgages when monthly payments are not feasible.

How We Evaluated These Products

We compared HEIs and reverse mortgages across six factors: total cost over 5, 10, and 20 year horizons at various appreciation rates; eligibility requirements; consumer protections and regulatory oversight; flexibility of payout and settlement terms; tax efficiency; and impact on heirs and estate planning. Cost modeling used a $400,000 home baseline with 3% annual appreciation and current 2026 HECM rates. HEI provider data comes from published terms and independent reviews. Reverse mortgage data reflects FHA program guidelines current as of April 2026.

Frequently Asked Questions