Paying Off The House? Not An Emergency

Dear Dave,

Is it ever okay 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

Dave Ramsey is an eight-time national bestselling author, personal finance expert, and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth, and enhance their lives. He also serves as CEO of Ramsey Solutions and is the author of numerous books including Baby Steps Millionaires: How Ordinary People Built Extraordinary Wealth–and How You Can Too.