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Can You Use Home Equity to Deal with Holiday Expenses?

Can You Use Home Equity to Deal with Holiday Expenses?

Let’s face it, the holidays can be a rather expensive time of year. By the time you buy all those gifts, host and attend a few parties, and buy everything you need to transform your home into a winter wonderland, you can quickly find that you are spending hundreds of dollars. When this happens, you may start trying to figure out ways of getting a bit of help to cover all of these extra costs. One thing you might be considering is a home equity loan. However, is this a good idea? Keep reading to find out.

girl opening holiday gift

What Is a Home Equity Loan?

These types of loans are given as a percentage of the amount of equity that you have built up in your home. In most cases, lenders cap the amount you can get at around 85% of the built up equity, but this can be less depending on your credit, income, and the actual value of your home.

A home equity loan is also referred to as a second mortgage, which requires you to make preset payments every month, just as you do with your original mortgage. This loan uses your home as collateral, which means that if you don’t make the payments each month, the bank can take your home.


HELOC, or home equity line of credit, is another type of equity loan, but this one is set up in a way that is similar to a credit card. The cash is there when you need it, and all you have to do is either use the credit card provided with the loan, or write a check against the balance whenever you need a little extra cash. You will still have to make monthly payments, but with a HELOC, you only make payments on the amount you use, rather than the entire amount that might be available.

Using the Available Funds

Whether you opt for a second mortgage or a home equity line of credit, you can use the cash for whatever you need. There are some cases where a contract may state stipulations for what your equity can and cannot be used for, but this is generally very rare – just make sure to read the fine print or speak to your lender, before spending the money on expenses that are not related to your home.

If there are no special stipulations in your contract, you can use the funds from your home equity for any purpose, even buying all those gifts this season. However, you should consider this carefully before blowing through all of your available loan amount. If your roof collapses due to too much snow, or your pipes freeze and bust, will you be able to cover those expenses without the loan proceeds? If not, you may want to consider cutting back on how much you spend, just to make sure the money is there if you need it later.

The bottom line is that you can use your home equity to cover holiday expenses. However, you should make sure that this is a good idea for your particular situation before doing so. As mentioned, if you can’t make the payments, it could end up costing you your home if the bank decides to foreclose.

Home equity loans can be a great source of extra cash if they are used appropriately. If you know your home needs major repairs, it might be a better idea to use the loan for those things, rather than on gifts – especially if it would make your home more comfortable and safer for your family. Let the professional lenders at Ace Mortgage help you with your home loan needs.