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Should retirees consider a home equity sharing agreement (HESA)?

– moneysense.ca

Toronto-based Clay Financial recently began accepting applications for a new home equity product called a home equity sharing agreement, or HESA—not to be confused with the HISA, which stands for high-interest savings account.

Clay raised seed funding in 2023 and is initially launching the product to home owners in the Greater Toronto Area as an alternative to reverse mortgages and the simple—although not always ideal—option of selling a property to downsize or become renters.

What is a home equity sharing agreement?

The HESA is a relatively straightforward concept. You give some of your home equity to Clay in exchange for cash today. Clay will get paid when you sell your home in the future, up to 25 years down the road, meaning you don’t need to make monthly payments in the meantime.

The limit for a HESA is up to 17.5% of your home’s value, up to $500,000. However, most home owners will get nowhere near that $500,000 limit. The average Canadian home price in December 2023 was $657,145, according to the Canadian Real Estate Association…

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