How a HELOC Lender Counts an Existing Home Equity Agreement

The Quick Read: A recorded home equity agreement (HEA) lien shows up on title, so a HELOC lender sees it and counts it against combined leverage, though no published standard says at what dollar amount, and treatment varies by lender and file.

• The HEA has no monthly payment, so it adds little to debt-to-income, but the lien still reduces usable equity.
• The amount counted may be the original advance or a current settlement estimate. Lenders differ.
• Lien order matters: an HEA recorded ahead of the new line puts that line further back.
• The HEA holder’s consent, or a payoff at closing, is often the deciding gate.
• On Lendmire’s network, an investment-property line tops out at 70% CLTV, and the borrower must hold title personally or in a revocable living trust.

A home equity agreement looks like a clean product. The owner gets cash up front and makes no monthly payments. The repayment is a lump sum later. That structure is exactly why it confuses a lender reviewing a new equity line. This article walks through how the file gets read, step by step, and where the usual treatment breaks down.

What Is a Home Equity Agreement, in Plain Words?

An HEA gives the homeowner a lump sum today in exchange for a share of the home’s future value. It is also called a home equity investment, a shared equity agreement, or a home equity contract. The CFPB’s market overview uses the term “home equity contracts” and notes that the company secures its interest with a lien, as a mortgage lender does.

Repayment is due at the end of the term or on a trigger event such as a sale. ALTA’s summary of the same report puts typical terms at 10 to 30 years. The same summary says roughly 90% or more of customers in the review had a mortgage senior to the HEA.

That last point matters for the rest of this article. An HEA is usually the second lien, which means a new HELOC behind it would be third.

Key Terms Defined

Home equity agreement (HEA): A contract that pays the owner cash now in exchange for a share of the home’s future value, repaid as a lump sum.

HELOC: A revolving line of credit secured by the home, drawn and repaid over time.

CLTV (combined loan-to-value): All home-secured debt divided by the home’s value.

Lien position: The order in which recorded claims get paid, set by recording order and not by product name.

Subordination: An agreement by one lienholder to move behind another claim.

Settlement amount: The lump sum the HEA holder is owed when the agreement ends.

How Does the HELOC Lender Find the HEA?

The lender finds it on the preliminary title report. A recorded HEA lien appears whether or not the borrower brings it up. The borrower should disclose it anyway, because a lien that surfaces late stalls the file.

The recorded lien also tells the lender little about the deal. The National Consumer Law Center notes that recorded liens do not explain the transaction terms and that even seasoned professionals find the underlying contracts hard to understand. So expect the lender to ask for the contract itself, and often a current payoff or settlement estimate.

How Does the Lender Count It?

It depends on the lender. No published standard sets one rule for counting an HEA, and this article will not invent one. What can be said is how the pieces fit.

CLTV counts all debt secured by the home. An existing lien reduces the room under the new line’s limit. The open question is the figure to use for an HEA, since the payoff is a lump sum tied to home value. Lenders can reasonably choose among these bases:

Treat any specific counting rule you hear as lender-specific. If the file runs through a settlement estimate, the number can move. The CFPB spotlight text notes the settlement amount may rise if the owner does not maintain the property to the agreement’s standards.

Does the HEA Count as Debt?

For leverage, effectively yes. For monthly debt-to-income, mostly no. The HEA has no payment, so it adds nothing to DTI in the usual way, and the owner’s ratios can look clean. The lien and the future lump sum still reduce the equity the lender can lend against.

Marketing often says an HEA is not debt. The National Law Review’s summary of the CFPB’s warning says the agency disputes that framing. The legal question of whether an HEA is a loan also varies by state. Consumer Finance Monitor names Connecticut, Maryland and Washington as states that regulate these products as residential mortgage loans. A state that treats the HEA as a mortgage may change how a lender views it.

Worked Example: Counted Versus Not Counted

Run the numbers on a home with a first mortgage and an HEA, using round illustrative percentages. Say the first mortgage sits at 40% of value. The HEA’s counted amount is 15% of value. A lender applying the 70% investment-property ceiling on Lendmire’s network, subject to lender guidelines, has these choices:

Same house, same borrower. Counting the HEA halves the usable room. These percentages are modeled assumptions, not market data. The size of the gap is the reason the counting basis is the first question to ask.

What Does the Network Allow on the Line Itself?

The ceilings depend on occupancy. On Lendmire’s network, an investment-property line tops out at 70% CLTV with a 700 minimum credit score and a maximum line of $500,000. Primary-residence lines reach 90% CLTV only at a 720-or-better credit profile, with a program ceiling that applies by tier. Second homes reach 90% CLTV at 720 and above as well.

Investors often pull equity from a primary home to fund rental purchases, so that tier matters. The line can sit in first or second lien position, and the borrower must hold title personally or in a revocable living trust. LLC-held property cannot hold title on these lines. Lines at or below $500,000 ordinarily run an automated valuation, though a higher CLTV may require a secondary valuation. Availability is limited to Lendmire’s 16 full-service states, which is narrower than its DSCR footprint of 41 markets, including Washington, D.C. All of this is subject to lender guidelines and full file review.

A third-lien position is the practical problem. The network structures a line in first or second position, so an HEA sitting second can force a payoff, a subordination, or a different route. Some lenders will not lend in third position at all.

Lien Order and Consent: The Real Gate

Position follows recording order. If the HEA is recorded ahead of the new line, the new line sits behind it. The junior lender decides on its own terms and has no duty to subordinate.

HEA providers set their own conditions. One provider’s public page, Hometap, says it will not subordinate below third position and wants a lender-ordered in-person appraisal within a set window. That is one provider’s policy. Do not generalize it.

Where the General Rule Breaks

Unrecorded or poorly described HEAs. If the lien does not show the economics, the lender must get the contract or a payoff estimate to size it.

Rental use. The CFPB’s review found the typical user is an owner-occupant, with some reports of investing use, per the ALTA summary above. Whether an HEA is available on a non-owner-occupied rental varies by provider.

Vesting. An HEA on a property deeded to an LLC creates a second problem, because the network’s equity lines cannot close with an LLC on title.

Property type. Manufactured homes, co-ops, condotels, log homes, commercial, mixed-use and agricultural-zoned property are not eligible.

DSCR refinance instead. A new DSCR first mortgage needs first position, so the HEA must be subordinated or paid off. The Vital Law summary of the CFPB materials says the lien can make a new loan or refinance hard without paying off the HEA.

What the Investor Decision Looks Like

An HEA taken earlier can shrink or block a later line, because of the lien and the consent it needs. Plan the sequence. Resolve the HEA before applying: get the payoff estimate, ask the provider about consent, or decide whether to retire it.

A HELOC lender underwrites the borrower and the collateral, not the rental’s cash flow. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. That difference is why investors compare paths. The complete DSCR loans guide covers the rental-side path.

Bring these to the lender: the HEA contract, the recorded memorandum, a current settlement estimate, the first mortgage statement, and any existing line statement. Expect credit and DTI review as usual. The DTI limit on the network is 50% maximum, qualified on the interest-only payment at maximum draw.

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals.

About Lendmire

Lendmire — NMLS# 2371349 — is a mortgage broker that arranges home equity lines of credit in its 16 full-service states through wholesale lenders, on primary residences, second homes and investment properties. Every line is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

Investors who want the broader program framework can review how DSCR loans work.

References

1. CFPB Issue Spotlight: Home Equity Contracts Market Overview

2. ALTA

3. National Consumer Law Center

4. CFPB Issue Spotlight (full text copy)

5. National Law Review’s summary

6. Consumer Finance Monitor

7. Hometap

8. Vital Law summary