Is it ever OK to pull money out of your emergency fund to pay off your home?

Dear Dave,

Is it ever OK to pull money out of your emergency fund to pay off your home? My husband and I were talking about this the other day, because we are so close to paying off our mortgage. We would appreciate your thoughts.

Erin

Dear Erin,

Believe me, I understand how tempting it could be to throw a bunch of money at your house, get rid of the mortgage payments and own it outright. But, I wouldn’t recommend draining your emergency fund to make it happen—even if it meant being completely debt-free sooner.

The only time I might suggest doing something like this is if your emergency fund is way too big, and you have a very small amount left to pay on the house. As a reminder, your emergency fund should be three to six months of expenses, not three to six months of income. And anyway, paying off your house doesn’t fall into the category of an emergency. The fact that you have to pay for your house doesn’t really catch anyone by surprise.

I don’t know how old you two are, but if you’re married you’ve probably already learned that life happens—often when you least expect it. And the moment you write that big check, you’ll have put yourself at risk. If you do something like this, you’re absolutely begging for the transmission to go out in a car, the central unit to break down or the roof to spring a leak.

Having a depleted emergency fund in any of those situations? That’s not my definition of financial peace.

— Dave

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