Typically, you can get access to your equity by taking out a home equity loan, opening a home equity line of credit (HELOC), or doing a cash refinancing, but these options can come with high interest rates, closing costs, and strict credit score requirements.

So what's a cash-strapped homeowner with a shaky credit score to do?

Another option is a home equity investment (HEI), also known as a home equity sharing agreement.

"Home equity investments are often a good option for homeowners with poor credit or high debt-to-income ratios," says Andrew Latham, certified financial planner and head of content at SuperMoney.com.

But remember, there are some very important strings attached.

"On the one hand, they can provide a way for homeowners to gain equity in their homes without taking on additional debt," Latham said. "On the other hand, they typically charge high fees, and investors are likely to reap a large portion of the gains from the appreciation of the home."

Here's what you need to know about home equity investing so you can decide if you want to consider looking into it further.

What are home equity investments?

When you agree to make a home equity investment, you are essentially allowing an investment company to buy a portion of your home equity in the form of cash. Higher education loans differ from home equity loans and HELOCs in that you don't have to make monthly payments or worry about interest rates.

"Heis are liens on properties, not loans, allowing homeowners to sell part of their homes for cash today," says John Green, CEO and founder of Nada, a Dallas-based housing investment and financing platform.

For example, if an investment company buys 15% equity in your home and your home is worth $200,000, it will give you a lump sum of $30,000.

When an investment company buys a share of the equity in your home, it dictates how long its stake lasts (typically 10 to 30 years) - which is key - and how much you have to pay back at the end of the term of the agreement. In most cases, the homeowner will have to repay the initial sum plus a percentage of the home's appreciation over the life of the contract.

If your home appreciates in value at a significant rate, the return on the equity investment in the home could double or even triple the amount originally given to you by the investment company. Typically, though, your contract will place a cap on the investor's annual appreciation.

How does the HEI return work?

This is where higher education gets a little tricky.

If your home loses value, so does the value of the investor's stake. So you only have to pay back 15 percent of the home's value, even if that's less than the original total.

But if the home appreciates, the value of the investor's stake goes up, and so does the amount you have to pay back.

Let's look at the example of a $200,000 home: If your HEI is a 10-year contract, during which the value of your home increases by 3% each year, the home will be worth $268,783 at the end of the contract term. The homeowner would then have to repay the original investment plus the investor's 15 percent stake in the home's appreciation. That's $30,000 (original investment)+ $10,317 (15% of home appreciation)= $40,317.

"You will be required to pay this at the end of the contract, either out of your savings, through a loan, or from the proceeds of the sale of the home," said Heather Petty, a home loan and mortgage specialist with Finder in Reno, Nevada.

If you can't repay the appreciated amount, investors can force you to sell your home.

Before signing a contract, make sure your terms include a maximum amount of repayment.

"There's usually a formula to determine the repurchase amount, but it's always tied to home appreciation," Mr. Green said. "There's a 15 percent cap, an 18 percent cap, a 30 percent cap, and an uncapped HEI agreement, which has a big impact on the amount of future returns."

The most obvious benefit of HEIs is that you get immediate cash even if you have bad credit. That could appeal to homeowners who own a home but are cash-strapped and have a credit score below 620. (That's the minimum score typically required to qualify for a traditional home equity loan.)

"Typically, that means self-employed borrowers, individuals with questionable credit, and those with high debt-to-income ratios," said Jonathan Rundlett, president of EXIT Mid-Atlantic Realty. "You get cash and you don't have any extra monthly debt like you would with a traditional loan."

It's true. Higher education loans are paid to homeowners in a lump sum at the beginning of the agreement and are required to be paid in full at the end. That means no monthly payments and a little breathing room for homeowners who may feel like they're drowning in bills.

Taking a high investment means handing over a portion of your home's appreciation to the investor. By doing so, you may actually pay out more at the end of the contract than you originally received for your cash investment.

"If your property appreciates substantially, as we've seen during the COVID-19 pandemic, you could end up paying a very high rate of return to the company versus the interest that a traditional loan product might pay," Lundlett said.

In addition, your mortgage company may prohibit you from receiving an HEI or the penalty of an assessment entering into this type of agreement.

"If you have a mortgage on the property, there may be a clause in the contract that doesn't allow you to enter into an equity sharing agreement," says Lundlett. "This may allow [your lender] to use their acceleration clause, which gives them the option to ask for the entire loan balance to be paid off immediately."

There is no perfect formula for quick cash, especially in this economy. But talk to a financial planner and think about your long-term financial goals before accepting an HEI or signing up for a home equity loan. Then, get a second opinion.