How I used my home to fix my home: tapping home equity during financial turmoil
Key takeaways
- Homeowners can use their home equity as a source of quick and potentially lower-cost funds in times of financial emergencies.
- Options for accessing home equity include home equity loans and HELOCs, cash-out refinances, reverse mortgages and shared equity agreements.
- Home equity loans/HELOCs, reverse mortgages and cash-out refis are forms of financing that either augment or replace your primary mortgage.
- Shared equity agreements, in which an investor buys a stake in your home, are convenient if the eligibility guidelines for traditional home equity products are too stringent or you want to avoid additional debt or monthly repayments.
Our historic home was in trouble.
The roof and exterior walls of its enclosed porch were starting to leak more and more water with every passing rainstorm, and the spongy flooring on the porch felt like it might give way at any moment. If we didn’t do something soon, warned our contractor, the roof or a wall might cave in or we could fall through the floorboards. If that happened, we could be on the hook for close to $40,000 and maybe more — if, say, the damage extended to the windows, which were literally sitting in the wood paneled walls.
Adding to the complications: Our home, dating from the 1840s, is in a historic district in a small, upstate New York town, making any restoration potentially more difficult (and expensive) — especially if changes to the exterior became necessary. So, time was of the essence.
My husband and I didn’t want to dip into our savings. We considered a personal loan, but the interest rates were high, even with our very good-to-excellent-credit. Then, an idea: Maybe we could use our home to improve our home. Years ago, we had taken out a home equity line of credit (HELOC) to fix up a second bathroom. Maybe our ownership stake could help us again.
After looking at our remaining equity and speaking with a financial advisor at our local credit union, we decided to take out a home equity loan. We would use it to settle the HELOC balance and then pay our contractor for the repairs, plus some strategic upgrades.
Like us, homeowners who have built up a substantial equity stake can use it to pay bills or big expenses — especially unexpected ones. Here’s how your home equity can be tapped during turbulent times, along with notes on our experience.
How home equity can be an option for unexpected expenses
Though an emergency fund is good insurance against financial turmoil, maintaining one is not always an option. Over one quarter (27 percent) of Americans have no emergency savings at all, according to Bankrate’s 2025 Emergency Savings Report. One-third (33 percent) have more in credit card debt than they do in emergency savings. And, when asked how they’d deal with a major unexpected expense, less than half (41 percent) said they would pay for it out of their savings.
A majority of American homeowners (59%) would not be able to pay for a $5,000 emergency home repair without going into credit card debt, according to Clever Real Estate’s “True Cost of Homeownership 2025” survey.
While we have an emergency savings account, it would not have covered the five-figure cost of the necessary repairs. And we wouldn’t have wanted to drain it anyway. So, we began exploring financing options.
How can you access your home’s equity?
Home equity is the share of your residence that you own outright; essentially, it’s the difference between your home’s value and the amount you owe on a mortgage. The more you’ve paid on your mortgage and the more your home’s market value increases, the more equity you have available. There are several options to cash in on your home value:
- home equity loans/home equity lines of credit (HELOCs)
- cash-out refinances
- reverse mortgages
- shared equity agreements
Comparing home equity access options
| Cash-out refinance | Home Equity Loan | HELOC | Reverse mortgage | Shared equity agreement | |
| Amount of equity required | 15 to 20 percent equity | 15 percent to 20 percent equity | 15 percent to 20 percent equity | 50 percent equity | 20 percent equity |
| Minimum credit score requirement | Varies — typically 620 | Mid-600s | Mid-600s | N/A | 500 |
| Maximum borrowing amount | 80 percent of equity | 85 percent of equity | 85 percent of equity | $1,209,750 in 2025 | 10-15 percent of the total home value |
| Approval time | 45 to 60 days with a 3-day waiting period | 14 to 42 days | 30 to 60 days | 30 to 45 days | 10 to 30 days |
| Payout | Lump sum | Lump sum | Line of credit | Line of credit, monthly payments, or lump sum | Lump sum |
| Interest rate | Fixed or variable | Fixed | Variable | Fixed or variable | None |
| Repayment terms | Fixed monthly payment over 15 to 30 years | Monthly payment over 5-30 years | Monthly payment over 10-20 years | Full repayment when homeowner dies or vacates property | No monthly payments; homeowner pays back investment plus appreciation upon sale of home or at end of a set period |
| Fees | 3-5 percent of principal | 2-5 percent principal | 2-5 percent principal | The greater of $2,500 or 2 percent of the first $200,000 of home’s value, plus 1 percent of the amount over $200,000. Capped at $6,000 | 3% of total loan, other closing costs |
Ways to access home equity
Cash-out refinance
A cash-out refinance is a type of mortgage allowing you to replace your current mortgage with a larger loan; you receive the difference, which is based on the value of your home equity, as a lump sum payout. Since it is essentially a new mortgage, you will go through the same application and underwriting procedure; it may be more streamlined than your first mortgage’s, however.
While your monthly mortgage payment will likely increase when you choose this route, a cash-out refi allows you to keep one mortgage payment, unlike a HELOC or home equity loan (which are additional mortgages to the first).
Benefits of a cash-out refinance
- One mortgage versus two
- Access to a large amount of cash in a lump sum
- Opportunity to change mortgage interest rate or term
We might have gone this route, but our current mortgage has a 3.25 percent rate which we may never get again. Refis tend to work best if interest rates have fallen since, or at least stayed the same as, your current mortgage.
Home equity loans/HELOCs
The traditional home equity loan allows homeowners to borrow a lump sum, based on the value of their home equity stake, and to repay it in fixed installments over one or two decades. A home equity line of credit (HELOC) works similarly, except that it allows for flexible withdrawal amounts over a set period. Interest is charged at a variable rate, but you only pay interest on the amount you actually borrow.
We had taken out a HELOC to redo a small second bathroom, just as the pandemic hit. But for this job, we chose a home equity loan because we were concerned about the potential for the interest to spike on a variable-rate HELOC. In fact, our old HELOC had already risen considerably, from around 4 percent when we got it, to 9.09 percent. Also, our payback period (five to 10 years after the draw period) on a HELOC would have coincided with sending a kid to college.
We didn’t want any surprises, so we selected a 30-year fixed-rate loan. It was in the mid-five figures: enough to cover the contractor’s maximum estimate and to pay off the HELOC. Ironically, the fixed rate we qualified for was 9 percent — higher than we liked, but around the average for HELoans at the time (and much less expensive than a personal loan or a credit card). And, since we knew the monthly payment going in, we could budget for it.
Benefits of using a home equity loan/HELOC
- Fixed interest rate (home equity loan)
- You can only spend what you need (HELOC)
- Lower interest rates than personal loans (both)
- If you use for home renovations or improvements, you can deduct the interest (we did)
Reverse mortgage
A reverse mortgage allows you to cash-in your equity for either a lump sum or a series of payments. The loan does accrue interest, but you don’t have to pay it – or anything – until you leave or sell the home. Then the principal and interest gets repaid, or else the lender gets the property.
The catch? You usually must be at least 62 (some lenders are ok with age 55) and have most, if not all, of your mortgage paid off. Also, even if no repayments are required, interest does accrue on the loan, which can cause sticker shock when the mortgage comes due.
Benefits of a reverse mortgage
- Provides tax-free, lifetime access to equity
- No monthly payments required (not even of interest)
- Allows homeowners to remain in their homes (and provides cash for age-in-place upgrades)
- No repayment required until the borrower dies, sells or permanently vacates the home
Shared equity agreement
In a shared equity agreement, equity investment companies purchase a portion of the home’s ownership, paying the homeowner in cash in exchange for the right to profit from the home’s appreciated value in the future.
Homeowners either buy out the investors’ equity share after an agreed-upon time period or pay out a percentage of the amount they later sell the house for. In the meantime, they don’t have to make any repayments.
This arrangement can appeal to homeowners unable to afford the increased monthly payments of a refinanced mortgage or HE Loan. Sharing agreements can also be comparatively quicker to close and have lower credit requirements than home equity loans and cash-out refinances.
However, most agreements are structured so that, at payback time, the investor receives a positive return. In short, the homeowner usually ends up paying more than the amount they received — and, if the home has appreciated in value, sometimes more than what the interest on a loan would’ve been.
Benefits of a shared equity agreement
- Looser requirements: Lower credit scores and high debt-to-income ratios may qualify
- Faster cash out: You can get your money in as little as 10 days
- No monthly payments
- No interest payments (so you don’t have to worry about where rates are going)
We didn’t consider this option. Because we had strong credit and had qualified for home equity financing once before, we were pretty certain we could do it again.
Should you tap home equity in an emergency?
Homeownership can be a financial cushion when things go wrong. My family and I decided to use our equity because it was more affordable than paying back a personal loan, and we felt that, though sparked by an emergency, it was also a good investment. The repair work was around $20,000, and we made some additional upgrades to the porch (including some lovely casements for the 10 windows) for around $8,000.
Today, our porch is safe and dry and likely to add value to our home: Because we insulated it, allowing us to use it almost year-round, we have increased the usable living space, which always enhances a place’s worth.
But we didn’t make the decision lightly. This second mortgage increased our monthly mortgage payments by approximately $1,100. That sum included the HE Loan closing costs and HELOC prepayment penalty, which we folded into the loan. So we did have to adjust our budget, and we’ll have to plan carefully when future expenses loom.
Fortunately, our redone porch is the perfect place to curl up and crunch numbers.
