Own a Home? Here's How It Could Help You Get Through a Recession

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KEY POINTS

  • Many experts are predicting that a recession will batter the economy in 2023.
  • If you're a homeowner, you may have more options for borrowing money than someone who rents.
  • You may be able to take out a home equity loan or loan of credit.


Being a homeowner has its benefits during periods of economic decline.

You'll often hear that being a homeowner can lead to more financial stability. When you own a home and pay down your mortgage, you get closer to owning an asset whose value can grow over time.

Plus, when you rent a home, there's always the possibility that your landlord will charge you more money every time you renew your lease. When you own a home with a fixed-rate mortgage attached to it, you're guaranteed the same monthly payment for the life of your loan (provided you don't refinance it).

Meanwhile, there's been a lot of talk about a potential recession in 2023. The Federal Reserve's aggressive interest rate hikes could lead to a serious pullback in consumer spending, thereby leading to a period of economic decline.

Naturally, the idea of a recession can be quite unsettling. But here's how being a homeowner could work to your advantage in that scenario.

When you need borrowing options

Perhaps the most frightening thing about the idea of a recession is the potential to lose your job. Workers who are laid off through no fault of their own are commonly eligible for unemployment benefits. But those benefits max out at a certain level, and if you're a moderate or higher earner, you may find that your weekly unemployment check doesn't come close to replacing your missing paycheck from work.

If that happens, you could tap your savings to get through a period of joblessness. But at some point, your savings might run out. That's where your home could come to the rescue.

If you own a home you have equity in, you may have the option to borrow against it via a home equity loan or home equity line of credit (HELOC). Now to be clear, in both scenarios, you're borrowing a sum of money you'll accrue interest on. But the interest you pay on a home equity loan or HELOC may be less than what you'd pay on another loan product. And it's likely to be far less than what you'd pay on a credit card.

Furthermore, there's the issue of qualifying for a loan to consider. You may have a hard time borrowing if you're unemployed. But if you're sitting on a lot of home equity, a lender may be willing to look past that because the sum you're borrowing is secured by a valuable asset.

Along these lines, you may find that you're able to qualify for a home equity loan or HELOC even if your credit isn't so great. That's because, once again, the loan in question will be secured by your home, and that gives lenders more reassurance.

Take comfort in being a homeowner

Owning a home can definitely be a challenge. When you own property, you're required to maintain it, fix it, and keep up with expenses like property taxes. But being a homeowner could work to your benefit if a recession strikes and a need for money arises. And that alone might give you more peace of mind as we see how things shake out in the coming year.

Our Research Expert

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