Many homeowners exploring HELOC alternatives also consider Unison’s innovative equity sharing products. Unison offers ways to unlock the value in your home with lower interest and more manageable monthly payments – or in the case of an equity sharing agreement – no monthly payments and no interest at all. Because no two situations are exactly the same, understanding all your options – from home equity loans to cash-out refinances – can help you make the choice that fits your financial goals.
What Is a HELOC and Why Look for Alternatives?
A HELOC, or home equity line of credit, is a revolving line of credit secured by your home’s equity. It lets you borrow as needed, pay interest only on the amount you draw, and repay according to the terms set by your lender.
While HELOCs can be flexible, they often come with variable interest rates, monthly payments, and the risk of taking on more debt than you originally may have planned. That’s where alternatives to a HELOC come in – options that may offer more predictable terms, lower monthly obligations, or even no monthly payments at all.
HELOC Alternatives from Unison
Unison offers two unique ways to tap into your home’s equity that work very differently from a HELOC:
1. Equity Sharing Agreement (ESA)
With an ESA, Unison invests alongside you in your home. You receive a lump-sum payment today – with no monthly payments and no interest – in exchange for a share of your home’s future change in value. You can use the funds for nearly any purpose. The agreement is typically settled when you sell your home, buy Unison out, or after 30 years.
2. Equity Sharing Home Loan (ESHL)
The ESHL is a 10-year loan with much lower monthly payments than many traditional options, thanks to a below-market interest rate offset by sharing in the change in your home’s value. And with a fixed rate, payments remain predictable during the term. This innovative structure gives homeowners access to equity up front, while keeping monthly obligations manageable.
Key difference from a HELOC: Unison’s ESA has zero monthly payments and zero interest. Meanwhile, with a lower, fixed interest rate the ESHL offers more manageable monthly payments and avoids the variable-rate risk common to HELOCs.
Who Might Still Prefer a HELOC?
A home equity line of credit alternative isn’t always the best fit for everyone. A HELOC could still work well if you:
- Want to borrow funds over time instead of all at once
- Plan to repay what you borrow quickly
- Are comfortable with variable interest rates and potential payment changes
If you want access to equity but prefer predictable costs or no monthly debt payments, Unison’s ESA or ESHL may be better options.
Other Popular Alternatives to a HELOC
If neither a HELOC nor equity sharing feels quite right, there are other ways to access your home’s value. Here’s how the most common HELOC alternatives compare:
Home Equity Loan vs. HELOC
A home equity loan provides a lump sum with a fixed interest rate and fixed monthly payments. Because it’s secured by your home, it’s sometimes called a “second mortgage.” Monthly payments stay the same throughout the life of the loan, but a shorter term can mean higher payments.
Cash-Out Refinance vs. HELOC
With a cash-out refinance, you replace your existing mortgage with a new, larger one and take the difference in cash. You’ll start a new loan term and may be able to secure a lower interest rate, but your repayment period will likely be extended.
Reverse Mortgage vs. HELOC
For homeowners typically 62 and older, a reverse mortgage provides payments from your lender, either monthly, as a line of credit, or as a lump sum. Repayment is due when you move or pass away. Lump sums usually have fixed rates; other formats often have variable rates.
Choosing the Best HELOC Alternative for You
The best HELOC alternative depends on your financial priorities – whether that’s avoiding debt, keeping monthly payments low, or maintaining flexibility. Each option comes with trade-offs in terms of interest rates, repayment schedules, and long-term costs.
The bottom line? Research each home equity product carefully, compare the total costs, and if possible, discuss your options with a financial advisor. The right solution must align with both your immediate needs and your long-term financial health.
Disclaimer: This content is provided for general informational and educational purposes only and is not intended to serve as financial, investment, legal, tax, or lending advice. The information presented may not apply to your specific situation, and actual outcomes can vary based on individual circumstances, market conditions, and applicable laws. Home equity sharing agreements and loans involve risks, including the potential loss of future home appreciation or other financial implications. Terms, availability, and eligibility for any products mentioned may differ by state, lender, or other factors. We strongly recommend consulting with a qualified financial advisor, attorney, or licensed professional before making any decisions or entering into agreements. Unison Mortgage Corp. is a licensed lender (NMLS ID 2574289); this article may include promotional content related to its services.