Your kitchen table is covered in two offers. One is a HELOC from the bank that already holds your first mortgage. The other is a sale-leaseback offer from a company you had never heard of six weeks ago. Both say you can get a hundred thousand dollars. Both say your house is worth roughly seven hundred. And both are described by the person selling them as “basically the same thing, just a different structure.”
They are not the same thing. They are not even the same category of thing. And the reason most homeowners pick the wrong one is that nobody sits down and does the arithmetic on a single sheet of paper. So we are going to.
A HELOC — a home equity line of credit — is a loan. You keep the house. The bank gets a lien behind your first mortgage. You draw money as you need it, you pay interest on the balance, and the interest rate floats. When the draw period ends (usually year ten), the balance amortizes over the remaining term and your monthly payment jumps. The CFPB’s HELOC explainer walks through this in more detail, and it is worth ten minutes of your life.
A sale-leaseback is not a loan. You sell the house to a buyer. You sign a lease that lets you keep living there. You get the equity, minus closing costs and any concession the buyer builds into the price. Then you pay rent every month until either the lease ends or you decide to move. No amortization. No rate that floats. But also — and this is the part that gets buried — no house at the end.
These are different species of financial product. Comparing them on “monthly payment” alone is like comparing a car lease to a plane ticket. Both cost money each month. One gets you to Cleveland.
Here is the scenario. You are sixty-two. You own a home appraised at $700,000. Your remaining mortgage is $180,000. Your equity on paper: $520,000. You need $100,000 to pay off credit card debt, help your daughter with a down payment, and rebuild an emergency fund.
Offer A, the HELOC: $100,000 line of credit at a variable rate currently sitting around 9.25%. Ten-year draw. Twenty-year repayment. Origination $450.
Offer B, the sale-leaseback: the buyer offers $610,000 for the house — a 13% discount to appraisal, which is normal for the category. You pay off the $180,000 mortgage and walk away with $430,000 in cash. You sign a one-year lease at $3,100/mo, renewable up to five years, with 3.5% annual rent escalators. At the end of year five, you move.
§ Two numbers that are not comparable
The HELOC gives you $100,000 as a line. The leaseback gives you $430,000 as cash. Same house. Same need. But they are not answering the same question.
Most comparisons stop at the monthly payment. Ours does not. Here is every dollar that leaves your bank account under each path over five years, including the thing neither the bank nor the leaseback company wants to talk about: what happens to the $520,000 of equity you started with.
| Line item | HELOC path | Leaseback path |
|---|---|---|
| Cash you walk away with on day one | $100,000 | $430,000 |
| 5-year interest cost (assume rate holds at 9.25%) | ~$46,250 | n/a |
| 5-year housing payment (mortgage kept) | ~$86,400 (existing P&I) | ~$200,100 (rent w/ escalators) |
| Equity position at end of year 5 | ~$500,000 (assuming 2% appreciation) | $0 |
| House at the end | You own it | You do not |
This is the moment where most comparison articles end with “so it depends on your situation.” We think that is a cop-out. The honest read is: the HELOC wins on total math, every time, if you can qualify and if you can carry the payment. The leaseback wins only when one of those two conditions is false.
That last sentence has two conditionals. They do a lot of work. According to the Fed’s Survey of Consumer Finances, a significant share of house-rich homeowners over sixty cannot document the income a bank wants to see on a HELOC application — even when they have half a million in equity. That is not a personal failing. It is how debt-to-income underwriting works. Equity does not count as income. Pensions sometimes do not either, depending on the lender.
If you are one of those homeowners, the HELOC column in the table above is fiction. The bank will not write the loan. You can argue with them about whether they should. They will still not write it. In that case the comparison becomes “leaseback versus nothing,” and nothing means a forced sale, possibly under worse terms.
There is a longer walkthrough on the refi-isn’t-an-option scenario elsewhere that we recommend, because it lays out the four real alternatives in the order a loan officer would actually consider them.
— How debt-to-income underwriting actually works
The second conditional. You can qualify, but carrying the monthly interest payment on top of your existing housing costs makes your budget fragile. Any shock — a roof, a hospital bill, a layoff — and you are behind on the HELOC, which now becomes a second-lien foreclosure risk.
For homeowners already under pressure, the foreclosure playbook matters more than any interest-rate comparison. When you are eight weeks from a sheriff’s sale, interest rates stop being the relevant axis. Speed and finality do.
This is where the leaseback stops looking absurd. Not because it is cheap. It is not. Because it converts a variable obligation (interest that floats, payments that reset, a bank that can call the loan in certain conditions) into a fixed obligation (rent, with a known ceiling) — and it eliminates the first-lien mortgage in the process. For a homeowner whose fear is not “am I leaving money on the table” but “am I going to lose this house in a panic,” that trade can be rational.
If you read only one paragraph of this essay, read this one. Before you sign either offer, answer these three questions on paper:
Both products are instruments. Instruments do not fix the thing that put you in the kitchen with two offers in the first place. If the underlying problem is “I have $48,000 in credit card debt at 27%,” neither a HELOC nor a leaseback is going to stop you from running the cards back up a year later unless something else changes. The FTC’s debt consolidation guide covers the boring part of that problem, and it is worth reading before you put the house on either side of the table.
There is also a useful distinction made in a longer piece on tapping equity without moving out: the equity is not free money. It is the last asset most Americans have. Spending it on anything other than a structural fix to the underlying cash flow is almost always a mistake. Even if the math of the instrument looks clean.
We do not like to write verdicts, because every homeowner we have ever spoken to had a wrinkle that made the generic answer wrong. But if you made us pick a rule of thumb, it is this:
§ The rule of thumb
If you can qualify for a HELOC and carry it comfortably, take the HELOC. If you cannot qualify, or cannot carry it, and you would otherwise be heading toward a forced sale, a well-structured sale-leaseback is worth evaluating. A badly structured one — short lease, no rent cap, single-buyer — is not. What “well-structured” looks like in practice is its own thirty-minute read.
That is the honest version. The dishonest version is whichever one the person in your kitchen is trying to sell you this week.