Key Takeaways
- HEA maturity means you owe one large lump-sum payment based on your home’s value at the time.
- A forced sale can happen, but you may be able to buy out the HEA or refinance instead.
- Planning ahead helps you avoid surprises and keep control over your options.
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Home equity agreements (HEAs) allow homeowners to access a lump-sum of cash in exchange for a share of the home’s future value. An alternative to home equity loans and HELOCs, HEAs can provide money for home renovations, debt consolidation, or other needs.
These agreements can be risky, though, as they require a balloon payment when your term ends, often after 10 to 30 years. The amount you have to pay at HEA maturity is unpredictable and may be much higher than you expect.
If you can’t afford to pay with savings, cash-out refinance, or another financing option, you may have to sell your house. Knowing how HEA maturity works, along with your payment options, can help you prepare and avoid a forced sale of your home.
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What is HEA maturity?
HEA maturity is when your home equity agreement becomes due. With an HEA, you don’t make monthly payments on the amount you borrow; instead, you pay it all back at once when the HEA matures.
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Timelines can vary, but they often span 10 to 30 years, depending on the provider. HEA maturity could also be triggered earlier if you:
- Sell the home
- Refinance your mortgage
- Transfer the home’s title to another owner
At HEA maturity, you must pay the provider their agreed-upon share of the home’s value at the time. There are no monthly payments or interest charges along the way.
What happens when a home equity agreement ends?
When a home equity agreement ends, homeowners must pay back what they borrowed plus a share of their home’s value in one lump-sum payment. If you borrowed $35,000, for example, you might pay back that amount plus 10% of your home’s value at the time of maturity.
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That payment is usually a large sum, so you might repay it by:
- Selling your home: You could use the proceeds from the sale to pay back your HEA provider.
- Buying out the HEA: If you have enough savings on hand, you could use those funds to buy out the HEA while retaining ownership of your home.
- Refinancing or using other funds: You could use another financing option, such as cash-out refinance or a home equity loan, to pay back the HEA provider.
Many homeowners feel pressured at this stage, since the required payment could be much higher than the original amount they borrowed.
HEA maturity and forced sales: How do they happen?
If you can’t repay your HEA provider through other means, you may have to sell your home to settle the agreement. A forced sale might occur if:
- You don’t have enough cash, savings, or other liquid funds on hand to buy the HEA
- You’re not able to refinance due to weak credit, insufficient income, or market conditions
- Your home appreciated rapidly, causing your HEA payout amount to exceed what you can afford
Forced home sales are typically a last resort, not a default outcome of HEA maturity. Ideally, you’ll be able to settle the HEA on your own terms, whether by choosing to sell your home, refinancing your mortgage, or paying off your agreement via other means.
Your options at HEA maturity
When an HEA reaches maturity, homeowners generally have three main ways to settle the agreement.
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Option 1: Sell the home
One option is to sell the home and repay your HEA provider from the proceeds. The more your home has appreciated, the more you’ll have to pay back your provider. This route could make sense if paying off the amount with cash or another financing option isn’t feasible. Ideally, you’ll also have some funds left over after paying off your HEA.
Option 2: Buy out the agreement
You can buy out the home equity agreement with savings, money from an inheritance, or other assets. You’ll retain ownership of your home, but the buyout amount may be higher than you expected if your home has appreciated significantly.
Option 3: Refinance or take out a loan
You could use another financing option to pay back your HEA, such as a cash-out refinance or home equity loan. However, qualifying could be challenging if you have credit issues or an unstable income. Market conditions can also impact what interest rates are available and how strict lenders are with their underwriting requirements.
Not sure which settlement path is realistic for you? The credit score requirements for HEI page can help you gauge whether refinancing is an option based on your credit profile.
Planning ahead to avoid forced sales
Early planning is crucial if you decide to enter a home equity agreement. Some steps you can take include:
- Monitoring the growth of your home value over time so you can estimate your potential payout amount
- Checking in on your refinancing eligibility before HEA maturity and taking steps to strengthen your credit profile if needed
- Reviewing HEA terms well before the end date so you understand maturity triggers, repayment obligations, and any other fees
- Working with a financial or housing advisor for help navigating your options
For a detailed look at how much you might owe, see our guide on the true cost of a home equity investment. Understanding the math now makes the settlement conversation much easier later.
Key risks homeowners often overlook
Even if you’re carefully planning for HEA maturity, HEAs carry some key risks that are easy to overlook:
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- Long-term cost of shared appreciation: The amount you have to repay grows as your home value increases. You may face a much higher bill than you expect, especially if your HEA has a long term.
- Market risk at maturity: It’s impossible to predict what interest rates, home values, and lending standards will look like when your HEA matures. Your options could be more limited than you anticipated.
- Less flexibility than traditional home equity products: Home equity loans and HELOCs let you make monthly payments that you can spread out over time, whereas HEAs require a lump-sum payment all at once.
- Emotional and timing pressure if your options are limited: As your HEA deadline approaches, you might feel stressed and forced to make quick decisions.
The bottom line
While forced sales can happen when an HEA matures, they’re not inevitable. By planning proactively and understanding the full lifecycle of an HEA, you may find a way to settle your agreement without relinquishing ownership of your home (or by selling it on your own terms). Monitoring your home value, checking your refinancing options, and working with a financial advisor can all help you prepare.
With their easier credit requirements and no monthly payments, home equity agreements can offer flexibility upfront for homeowners who need to borrow cash. However, they can be costly, and the exit strategy for an HEA matters just as much as the entry. Planning ahead for HEA maturity can help you make informed choices and hopefully avoid a forced sale of your home.
Your next steps
Whether your HEA is maturing soon or you’re years away, the best time to start planning is now. Here’s what to do:
- Run through the checklist below to see how prepared you are for HEA settlement.
- Estimate your payout. Use your original HEA terms and your home’s current estimated value to calculate what you’d owe today. Our true cost of HEI guide walks through the math.
- Check your refinancing options. If you plan to settle via a HELOC, home equity loan, or cash-out refi, find out what you qualify for now so there are no surprises later. Credit score requirements vary by product.
- Compare HEI providers. If you’re considering a new HEI to settle an existing one, review the top home equity investment companies for current terms.
Not sure if you’re prepared for HEA maturity?
Most homeowners don’t realize what they’re missing until it’s too late. This checklist walks you through the key signs you’re on track—and the warning flags to act on now.
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FAQ
Time to make a move? Let us find the right mortgage for you
No, HEA maturity doesn’t always result in a forced sale. You could use other financing options, such as savings, cash-out refinancing, or a home equity loan, to buy out the HEA while keeping ownership of your home.
Most home equity agreements have fixed terms of 10 to 30 years. If your provider lets you extend your term, they may add fees or increase their share of your home’s future value.
If the homeowner passes away before HEA maturity, the agreement may become part of the estate. Your heirs will be responsible for paying back the HEA.
At HEA maturity, you have to pay back everything all at once. When a HELOC matures, you can no longer withdraw from the line of credit and must start paying back the amount on a set term, often up to 20 years. HELOC payments tend to be more predictable, whereas your HEA depends on your home’s value.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
By refinancing an existing loan, the total finance charges incurred may be higher over the life of the loan.
