Question: Eric on Twitter asks if there’s ever a time to dip into his emergency fund in order to pay off his home early. Dave says it depends.
Answer: Only if it were a very small amount and if the emergency fund was too big and you were just going to take a little bit of it or something. If you’re sitting there with a $15,000 emergency fund and a $100,000 household income, no—you’d leave that alone. You might take $500 or something, but it’s not an emergency to pay off the house and you’re going to get there pretty quick to pay it off anyway without touching the emergency fund.
No, I wouldn’t drain the emergency fund down dangerously low in order to pay off the house. Tempting—very tempting. When you’re that close, you just want to knock that puppy out, but I still wouldn’t do it. It still wouldn’t be my plan. Instead, just work a little bit more. Build up a little bit more savings. Write a few more checks toward the house. You’ll get there.
Let’s say you drained it all the way down to $1,000 and the house is paid off. The next week, a $3,400 heat-and-air system will go out. You’re just asking for Murphy to come visit.