Use Home Equity for a Large Expense
Match how you borrow to when bills arrive, then check what repayment would mean for your home.
Use home equity for a large expense only if the payments fit your budget.
A known, one-time bill may fit a home equity loan. Costs that arrive in stages may fit a HELOC. Either way, you turn the expense into debt secured by your home. If you cannot repay it, you could face foreclosure. Check the full cost before choosing a smaller monthly payment.
What a large bill changes
A single due date may call for one lump sum. Bills spread over months may call for access to money as needed.
A long term can ease each payment but raise the total cost of a one-time expense.
The home secures this borrowing. A payment that looks manageable now must still work if your budget gets tighter.
What you could realistically do next
A lump sum may fit a bill with a known total, and payments are typically set.
What to check: Compare the amount borrowed, payment, fees and total cost. Avoid borrowing extra just in case.
Best if: Best if you know the amount and can afford payments through the full term.
Draws as needed may fit costs that arrive in stages, without taking the full amount at once.
What to check: Check when payments could rise, especially if the rate changes or repayment begins.
Best if: Best if the final cost or payment dates are still uncertain.
It may cover the bill, but it replaces your current mortgage, not just adds money for the expense.
What to check: Compare the new rate, term, fees and total interest with keeping your mortgage.
Best if: Best if replacing your mortgage also makes sense after a full cost comparison.
Make a payment plan before you borrow
- 1Confirm the bill
Confirm the amount you must pay and whether more bills could follow.
- 2Check the timing
Confirm whether you need all the money now or can pay in stages.
- 3Test the payment
Confirm the payment fits alongside your mortgage and other essential costs, even if your budget gets tighter.
- 4Check other ways to pay
Confirm whether aid, a payment plan or other help could reduce what you need to borrow.
- 5Compare full costs
Confirm the fees and total repayment for suitable offers, not just the first monthly payment.
A workable plan does not guarantee approval, a borrowing amount or a set rate.
Three numbers to check
Use the confirmed bill, less any aid or payment help, to avoid paying interest on money you do not need.
Find a payment your budget can hold after housing, food and other bills, including when a HELOC payment may rise.
Add up payments and borrowing costs across the full term. A lower monthly payment may cost more overall.
Easier payments can mean more cost or risk
A home equity loan can give you the full amount for a known bill.
You pay on the amount borrowed, including any money you did not need.
A HELOC lets you draw money as bills arrive.
Payments may change, and easy access can leave you carrying debt longer.
A refinance can provide cash through a new mortgage.
You replace your current mortgage and may pay more over the new term.
Good to know
Should I use home equity for tuition?+
Check school aid and payment plans before securing tuition with your home. Tuition may recur each term, so plan for more than the first bill. If you still need to borrow, compare the full cost and confirm the payments fit alongside your mortgage.
What should I check before using home equity for medical bills?+
Ask about bill assistance, insurance corrections and payment plans first. Those steps may reduce what you owe or let you pay without putting your home at risk. If you borrow, use the confirmed amount rather than an early estimate.
Is a home equity loan a good fit for a big purchase?+
It may fit a known cost, but first ask whether the purchase is worth years of payments secured by your home. Compare the total cost with saving up or using a shorter way to pay. A smaller monthly payment alone does not make it cheaper.
Can I borrow all the equity in my home?+
No. The equity you have is not the same as the amount you can borrow. Your mortgage balance, home value and lender requirements all matter. Check what you may qualify for before counting on home equity to cover the bill.
Can I deduct the interest if I use home equity for tuition or medical bills?+
Interest on home equity debt used for personal expenses is generally not deductible under federal home mortgage interest rules. Tax treatment depends on current law and your circumstances. Do not count on a tax break when deciding whether the payments work.