In times of economic uncertainty, many homeowners look to their greatest financial asset — their home — for stability. And with interest rates still elevated in 2025 and savings feeling squeezed, the idea of using a second mortgage as a financial backup has re-entered the spotlight. Some say tapping home equity is risky business in any situation. Others treat it like a low-cost emergency fund. So, what’s the consensus? Can a second mortgage really be a smart safety net? Let’s look at both sides and break down what you need to know before counting on your home equity in a financial pinch. What Is a “Second Mortgage,” Really? A second mortgage is a loan that lets you borrow against the value of your home — separate from your existing mortgage. It’s called “second” because it’s second in line to be repaid if the home is foreclosed. There are traditionally two options: Home Equity Loan (Second Mortgage): A one-time lump sum with a fixed interest rate and set repayment schedule. Often used for larger, planned expenses. HELOC (Home Equity Line of Credit): A revolving credit line you can draw from when needed, similar to a credit card. It’s not technically a second mortgage, but it works similarly and is often used for ongoing or flexible expenses – like emergency funds. Both are secured by your home, which means failing to repay them can put your property at risk. The “Free Money” Mindset: Why It’s Dangerous It’s common to see HELOCs, in particular, pitched online as a fast, easy, and practically risk-free way to get through a rough patch: “Why not open a HELOC just in case? It’s basically free money sitting in your house.” While a HELOC can offer flexible access to funds, it’s not the same as having cash in the bank – and it’s never really “free”. Here’s what this mindset often overlooks: You have to qualify first. You’ll need to show sufficient income, creditworthiness, and home equity, which can be harder in a crisis. Access isn’t instant. The application process can take weeks. If you wait until an emergency hits, it might be too late. It’s still a loan. You’ll have to repay what you borrow, often with a variable interest rate that can rise over time. Your home is collateral. If you can’t make payments, your home could be at risk. That said, when structured properly, a HELOC can absolutely be part of a well-prepared financial safety net. The “Never Touch Equity” Mentality: Why It’s Also Shortsighted On the other end of the spectrum, some homeowners feel strongly that home equity should never be touched — no matter what. “You worked hard to build equity. Why risk it? Borrowing against your house is just asking for trouble.” That caution isn’t unwarranted. But when equity makes up the bulk of your net worth and you’re facing limited liquidity or unpredictable income, avoiding it entirely can be just as risky. Here’s why: Tapping equity doesn’t mean misusing it. Borrowing strategically — with a plan and purpose — isn’t the same as treating your home like an ATM. HELOCs can be opened and left unused. Just having one available doesn’t mean you’re automatically in debt. It can sit dormant as a contingency, and you only pay interest on what you borrow. Having access to capital can prevent worse outcomes. A well-timed draw from your HELOC could help avoid high-interest debt or missed mortgage payments during a short-term crisis. In short: it’s not about whether you tap your equity — it’s how and why. How to Use a HELOC as a Smart Backup Plan If you're thinking about using a HELOC as a financial cushion, here’s how to approach it responsibly: 1. Set It Up Before You Need It The best time to open a HELOC is when your credit, income, and home value are all strong. Waiting until you're in financial distress could make it much harder to qualify. 2. Don’t Borrow Unless You Need To You can open a HELOC and leave it untouched. Think of it like calling 911 — always there for an emergency, but you don’t call for every little thing. 3. Understand the Terms, Fully Draw period: The time frame (usually 5–10 years) during which you can borrow. Repayment period: After the draw period, you'll start repaying both principal and interest. Rate structure: Most HELOCs have variable rates, so monthly payments can increase. 4. Keep It as Part of a Bigger Plan A HELOC should complement (not replace!) your emergency fund. Ideally, it's there as a secondary layer of protection – but not your first line of defense. Is a HELOC a Good Idea in 2025? With rates still elevated and inflation weighing on household budgets, having flexible, low-interest access to cash can be a smart move. Especially if it helps you avoid higher-cost alternatives, like credit cards or personal loans. But don’t assume that HELOCs or home loans are automatic OR instant. It requires planning, discipline, and the ability to manage repayment, especially during turbulent times. For homeowners with significant equity, steady income, and a healthy credit profile, opening a HELOC now as a “just in case” option could offer peace of mind. Just be sure you understand the risks, and resist the urge to spend it on things that don’t align with your long-term goals. Build Your Backup Plan Before You Need It A second mortgage is never free money. But it’s not a financial boogeyman, either. Like any financial tool, it’s all about how and when you use it. For many homeowners in 2025, a HELOC or home equity loan can be a smart part of an emergency plan – if it's used carefully, with eyes wide open. At Unison, we’re here to help you choose wisely. From flexible HELOC offerings to innovative equity sharing options, our team can help you access up to 90% of your home’s equity (up to $500,000) – with no usage restrictions, no prepayment penalties, and FICO-friendly qualification starting at 640+. If you’re considering using home equity to stay prepared and reach your financial goals, we’re here to help you find a smart way forward. Disclaimer: This content is for informational and educational purposes only and does not constitute financial, legal, or lending advice. Loan terms and availability vary by lender and state. Consult a qualified financial professional or lender for personalized guidance tailored to your situation. Unison HELOC and Unison HELOAN are powered by SpringEQ and are not underwritten by Unison Mortgage Corp. Unison Mortgage Corp NMLS ID 2574289