This is certainly not the first time you have heard this from me – but home equity is one of the best financial resources homeowners have. But here is the new part … only if you can tap into it. Most people think that since their home is worth much more than they owe, they will be able to access it whenever they want. Unfortunately, that’s not necessarily true. Life happens. Markets shift. Guidelines change. And before you know it, the chance to use your hard-earned equity is lost.

I had a client who recently built a thriving business from the ground up. He was in great shape and ready to take it to the next level. All he needed was $100,000 for necessary equipment that would help him scale the business into new locations. His home had plenty of equity, but there was one problem: he no longer had qualifying income. While he was currently making more than ever in this new venture, as a non-W2 income, he was no longer qualified for regular financing. (PS, I have programs to help with this, but that’s for another article). Despite his thriving business, he was now a lending “risk.” He had the equity, but he couldn’t access it.

Then, there was the homeowner who undertook a home remodeling project that cost far more than expected. To pay for the extra costs, they put as much as they could on their credit cards. The plan was to take out a home equity loan or second mortgage once the work was completed. It was a good plan – the work had added over two hundred thousand dollars to their home’s value. But when they went to apply, they were shocked to find they were no longer qualified. The extra debt had ruined their credit despite making timely payments.

These aren’t unique stories. I’ve seen it happen time and time again. Homeowners assume their equity is theirs to use, but the reality is, lenders don’t just look at home value – they look at your entire financial picture. A single event – a job loss, a health crisis, a divorce – can make you ineligible overnight. Some people erroneously assume they can qualify for a loan as long as their payments are made on time, only to find out they are a few points shy of meeting the debt-to-income threshold. Others don’t realize that tax liens, judgments, or co-borrower issues can block them from borrowing altogether.

Then there are the unexpected life events – things no one plans for but that can completely change financial circumstances. A sudden job loss or change in payment history. A medical emergency that leads to unexpected bills or disability. A divorce can complicate ownership and financing options, while the death of a spouse or co-borrower can leave survivors without the necessary paperwork to qualify. Even something as routine as transferring the home into a trust or estate without proper planning can create roadblocks.

And let’s not forget that the broader market plays a huge role, too. Even the slightest smell of declining home values can shrink available bank programs, sometimes overnight. Beyond that, banks might have internal issues that force them to pull back on previously flexible guidelines (I’m seeing some of this now). Rising interest rates can make borrowing too expensive to be practical. Lenders tightening their policies during an economic downturn can suddenly make qualifying harder, even for well-qualified borrowers. Natural disasters, local market instability, or even fraud or identity theft that is unquestionably not you – can all give banks a reason to deny access to your hard-earned equity.

The key takeaway? Plan ahead. Equity is only an asset if you can access it when needed. If you think you might need funds in the future – whether for an investment, a business, home improvements, or simply a financial safety net – consider securing that financing before circumstances change. Because once it’s gone, it’s gone.

Would you rather not work and make half the money you can make if you were to work? Please let me know if you have a good “Would you rather” question, and we will highlight your submission.

Shmuel Shayowitz (NMLS#19871) is a highly regarded Real Estate & Finance Executive, Writer, Speaker, Coach, and Advisor. He is President and Chief Lending Officer of Approved Funding, a privately held national mortgage banker and direct lender. Shmuel has over twenty years of industry experience, holding numerous licenses and accreditations, including certified mortgage underwriter, licensed real estate agent, residential review appraiser, and accredited investor, to name a few. Shmuel has successfully navigated through many changing markets and business landscapes, making his market insights and experience well-coveted within the real estate industry. He can be reached via email at [email protected].