Home equity agreements (HEAs) are being marketed as an easy, no-payments way for homeowners to tap their equity. George Kamel, a Ramsey expert, said the concept sounds innocent on the surface but is deeply misleading, yet “millions of Americans are falling for it.” These companies frame the deal as a simple, stress-free alternative to home equity lines of credit (HELOCs), when in reality homeowners are “selling a piece of your house to Wall Street,” Kamel said.
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Basically, you get cash upfront today in exchange for giving up some of your home’s future value when you sell, he explained.
How HEAs Really Work — and Why They’re So Risky
Kamel explained that HEAs market themselves with tempting claims like no interest, no payments and no credit impact, claiming you can “use the cash to do whatever you want.” But the catch is huge: Investors are betting on your home rising in value, and they collect a percentage of your appreciation, too, which is often worth far more than the original cash you receive.
“At the end of the loan period, you pay them back … a percentage of the increase in your home’s value plus the original loan amount.”
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The Math HEA Companies Don’t Want You To See
Kamel argued that once you run the numbers, HEAs look less like help and more like a predatory financial trap. “This is crazy. You’re going to pay back over three times as much as you borrowed,” he said. Put another way, you essentially took out a loan with a 10% interest rate, which makes it worse than a HELOC.
If you need to move before your loan agreement period is up, he warned, “you’re immediately on the hook to pay back your loan plus a percentage of the appreciation.”
Why the ‘No Strings Attached’ Pitch Falls Apart
HEA companies push messaging like “cash today, no payments,” but Kamel said the promise doesn’t survive basic logic. “With home equity agreements, the company always wins,” he said, whether your home goes up or down in value.
And the homeowner carries all the risk. “If your house doesn’t appreciate, you still paid their fees and have to pay back the loan amount no matter what, which could mean losing your house.”
The People These Companies Target Most
According to Kamel, HEA firms are intentionally marketing toward the most financially vulnerable people with home equity but limited cash flow. “They are preying on people who are in desperate situations,” he said. Those who are “house rich, cash poor” for whom the promise of cash without having to pay anything for a long time “feels like freedom right now.”
Instead, it’s a trap, one that robs you of future wealth.
Real Homeowner Stories Reveal the True Cost
Kamel highlighted Reddit posts from homeowners who signed HEAs and later deeply regretted it. One user said the company is making a $20,000 profit on their $90,000 investment but holding the ability to sell over them. This and other stories show how quickly HEAs can spiral into big losses.
The ‘Smarter Way’ To Get Cash Without Selling Your Future
Instead of handing over equity to Wall Street, Kamel urged homeowners to solve the actual financial problem driving their need for cash: better financial habits. He recommended a series of practical steps, from cutting expenses to increasing income.
Most importantly, he said, “If you’re considering an HEA … don’t. Just please do not.” It would be better to downsize and own your equity than to give it fruitlessly away.
Why HEAs Undermine Your Long-Term Wealth
Kamel argued that the entire point of avoiding debt and building equity is to secure your financial future, not sell it off for short-term convenience. An “HEA … is selling off your future wealth.”
He cautioned viewers to “stay far, far away from predatory traps like home equity agreements.”
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This article originally appeared on GOBankingRates.com: A ‘Dangerous’ Housing Trend No One Is Talking About, According to This Ramsey Expert
