Using a HELOC as a Backup Emergency Fund

The "Standby" Strategy

Traditional financial advice says "Keep 6 months of expenses in a savings account." If your expenses are $5,000/month, that is $30,000 sitting in cash.
Some aggressive homeowners ask: "Why keep $30k earning 1% (after inflation) when I have a $100k HELOC I can use if something breaks?"

The Case For Using a HELOC

Opening a HELOC costs very little ($0 to $500). Once open, if you have a zero balance, you pay $0 monthly interest. It is a free safety net. You can take that $30,000 cash and invest it in the market, potentially earning 8-10%.

The Case Against (The Freeze Risk)

This is critical. In 2008 and 2020, when the economy crashed, banks panicked. They froze HELOCs overnight.
Imagine you lost your job in a recession. You go to draw on your HELOC to buy food, and the bank says "Sorry, due to declining home values, your line is suspended." Now you have no job, no cash, and no access to equity.

The Verdict

A HELOC is an excellent Secondary emergency fund. Keep 3 months of hard cash. Use the HELOC for months 4-12. Do not rely on it as your only lifeline.