Should you use home equity for emergencies?

Homeowners can access one of the best assets available to borrow money: the equity they’ve built up in their home. home The price has increased Over the past several years, homeowners have worked to pay off their mortgages, leaving many on the sidelines A large amount of equity Today.

Home equity loan And Home Equity Lines of Credit (HELOCs) Both allow homeowners to access that equity at competitive interest rates, even in today’s high rate environment. You can use this money for any purpose, but home improvements, renovations or debt consolidation are common.

If needed, you can even use your home equity to cover emergency expenses. This can be a great way to avoid taking on high-interest loans, but it may not be the best idea for every homeowner.

Want to tap into your home equity? Learn more about the loan rates you can qualify for now.

Should you use home equity for emergencies?

Everyone will face unexpected emergency expenses at some point. Whether it’s an unexpected auto repair or an extended loss of income, emergencies can get expensive quickly. for this Experts recommend Save at least three to six months of expenses a High Yield Savings Account.

“I’d rather pay (sic) cash than borrow, especially at these rates,” says Gregory Crofton, CFP, founder of Adap Tax Financial. He also recommends: “Maintain an emergency fund of at least 3 to 6 months’ worth of expenses and be careful to avoid overspending, especially with debt.”

But not everyone has the means for a fully stocked emergency fund. Home equity can be another asset for qualified homeowners to consider because home equity loans and HELOCs carry over. Competitive interest rates. They’re secured by the value of your home, so you can usually qualify for a lower rate than a credit card or personal loan — especially if you Apply with good credit.

In fact, there are a few instances where it can be smart to access your home equity for emergencies. financing Emergency home repairs an example. This is because if you use home equity loan or HELOC funds for qualified home improvements, you may have accrued interest. duty free.

If you’re considering using home equity for an emergency, choosing a HELOC can be smart. “My recommendation is to only use the HELOC emergency and don’t raise funds otherwise,” Crofton said recently CBS News.

In other words, you can Secure a HELOC Today, before an emergency strike, and leave the funds untouched. You won’t accrue interest until you actually withdraw an amount, but you’ll have access to equity if you need it. Can come with HELOCs Draw the period Up to 10 years, leaving you plenty of time to draw on it if needed while you build up your emergency savings.

See what home equity rates you may qualify for today here!

What to Know Before Using Home Equity for an Emergency

Using your home equity to cover emergencies can also be risky.

Especially for emergencies, you risk not being able to access your funds in time to cover expenses. If you haven’t already applied and been approved for it Home equity loan or HELOCIt may take several weeks for the lender to approve and disburse the money.

More generally, since home equity loans and HELOCS are secured by the value of your home, you risk losing it if you default on your payments.

“A home equity loan or HELOC can offer a much better interest rate than a personal loan or credit card, but it can put you at risk if you can’t afford the payments,” says Colin Zizzi, CFP, of Zizzi. Founder Investment. Make sure you determine if and how your monthly payments fit into your budget Interest rates may change Increase your payments over time and potentially every month.

Bottom line

Before you face an unexpected emergency expense, it pays to have a plan. If you don’t have enough of yours emergency fund To cover emergencies, tapping into your home equity may be worth considering. If it carries the lowest cost or you’re able to save interest by using it for eligible home repairs, it can be a smart choice. But before you decide, make sure you understand the costs involved — and the potential risks to your home.

Explore some of today’s top home equity rates to determine if a home equity loan or HELOC is right for you.