Hello, Financial Post and Apple News+ readers! đź‘‹
The conversation about Home Equity Sharing Agreements (HESAs) has taken a major step forward in Canada, sparked by a recent feature in the Financial Post and its inclusion in the Best of Apple News+. As the first Canadian company to launch a HESA back in early 2024, we’re excited to see this innovative option reach a wider audience of homeowners.
The growing interest has also sparked some great questions. To continue the conversation, we’re here to add some context, answer the most common questions we’ve heard, and clarify a few key points for homeowners exploring their financial options.
Q: What is a HESA? I’ve seen it described a few different ways.
The article uses the term “shared appreciation mortgage” – we’ve seen this term used sometimes but it’s important to distinguish a HESA from any kind of mortgage loan or other type of debt. You do not “borrow” money with our HESA, there is no interest rate, and there are no monthly payments. We don’t use the term so there’s no confusion: a HESA is not a mortgage loan.
The term “shared appreciation mortgage” can also be confusing for Canadians, because the Canada Mortgage and Housing Corporation (CMHC) refers to the federal government’s discontinued First-Time Home Buyer Incentive and down-payment assistance solutions from private companies like Ourboro as “shared equity mortgages”. These are different products from a HESA. Similarly, in the US, there is an emerging class of equity sharing loans, a type of second mortgage that offers a below-market interest rate while also participating in the appreciation of a home. This hybrid product is a mortgage loan and, again, is different from a HESA.
It’s better to think of a HESA as a shared equity investment in your home. It is a financial contract involving two main payments:
- An initial, tax-free payment from us to you, giving you access to a portion of your home equity.
- A final payment from you to us when you sell your home or exercise your right to end the agreement, which is based on the change in your home’s value.
This structure aligns our interests with yours. We both benefit when your home appreciates. And because it isn’t a loan, the payment you make to us at the end of the term could even be less than the amount we initially gave you if your home’s value declines.
Q: What is the true cost of a HESA? The 18% figure seems high.
The article highlighted one specific scenario that resulted in an 18% annualized cost of capital. This example, however, was based on a 5-year term, which is very short for a HESA. We designed the HESA as a long-term financing solution with an open 25-year term, not something that needs to be renewed or refinanced every few years like a typical mortgage. This long-term structure is fundamental to how it provides value and is key to understanding its effective cost.
The length of the term is critical. If we take the exact same assumption from the article (5% annual home price appreciation) but extend the term to the maximum 25 years, the annualized cost of capital is nearly halved, falling to 10%. If appreciation were a more modest 4% per year over those 25 years, the cost would be 8.6%.
Of course, home prices aren’t guaranteed to go up 5% every year. As any Canadian who has owned a home over the past few years knows, appreciation can be unpredictable. From May 2021 to May 2025, for instance, national home price indices have seen annualized growth of less than 1%.1
This is the fundamental difference between a HESA and a loan: interest is a guaranteed liability. With a HESA, your final payment is unknown because future home prices are unknown. Unlike a reverse mortgage or other no-payment loan, there is no risk of compounding interest eroding your existing equity if your home does not appreciate considerably.
This example also highlights a crucial point for homeowners: not all HESAs are the same. We designed Clay’s HESA with a flexible, open term of up to 25 years to provide long-term stability. Other providers may only offer shorter terms, such as 10 years. A shorter term not only results in a higher effective cost, as shown above, but it could also force you to sell your home sooner than you’d like if you’re unable to repay or refinance at the end of the term.
Q: Who is the HESA for? Is it only for homeowners in tough situations?
The article suggests that HESAs are primarily for homeowners who are “underemployed, the newly self-employed […] and divorcees.” While a HESA is a powerful tool for those who may not qualify for traditional financing, that description doesn’t capture the full picture of the homeowners we work with.
Since we began working with homeowners nearly two years ago, the average credit score of our homeowners is over 700, with a range from the mid-500s to the mid-800s. That represents a large swath of Canadians.
In most cases, these homeowners are comparing a HESA to other products like a reverse mortgage, a renovation loan, or a personal loan. They chose a HESA because they are concerned about how monthly payments will impact their budget, or they are worried that the compounding interest on a no-payment loan could erode their equity and the inheritance they plan to leave for their children.
The author is right that if you can qualify for and comfortably service a first mortgage or HELOC, that will likely be your least expensive option. However, we rarely see homeowners comparing a HESA directly to a HELOC. It’s often not an either-or decision. A HESA can work together with a mortgage and HELOC, allowing homeowners to fine-tune their home’s financing to access the right amount of capital with a sustainable level of monthly payments.
Q: Is 7% a “conservative” long-term rate for a reverse mortgage?
We think it’s worth looking at this assumption more closely. As of late 2025, most promotional rates for new reverse mortgage clients are already at or above 7% APR, with APRs for existing clients generally 0.2-0.7 percentage points higher.
More importantly, homeowners considering a loan that is refinanced every few years are taking on interest rate risk. With the Bank of Canada’s policy rate currently at 2.5%, we are near the lower end of the Bank of Canada’s estimated “nominal neutral rate” range of 2.25-3.25%. This suggests that, over the long term, average interest rates for all debt products are more likely to be higher than they are today.
We recently published a detailed sensitivity analysis comparing the costs of HESAs and reverse mortgages. You can read our findings here and choose your own assumptions to see how they compare.
Learn more about Clay’s HESA
Ultimately, every homeowner’s situation is unique. A HESA is not the right fit for everyone but it is a powerful, flexible tool that fills a critical gap in the Canadian market. By sharing in the ups and the downs with homeowners, it provides access to equity without the burden of monthly payments or the risks of compounding interest.
We hope this adds some helpful context to the growing conversation around home equity solutions. If you’re interested in seeing how our HESA could work for your specific situation, try our HESA Calculator and, when you’re ready, you can get a free, no-obligation estimate in just 2 minutes here.
- Based on analysis by Clay Financial of the Canadian Real Estate Association’s MLS Home Price Index (Aggregate Composite) and the Teranet-National Bank House Price Index (Composite 11). ↩︎
