There are two primary types of home equity products available on the market today: Home Equity Loans and Home Equity Lines of Credit. Each product offers its own unique advantages and disadvantages.

With a Home Equity Loan you gain the advantage of a fixed rate for between 15 and 30 years and it simulates a first mortgage, only in second lien position on the house. All of the cash is taken at closing and is paid back over time just like a first mortgage. You do not have the ability to draw back up on a loan once it is paid down.

Home Equity Lines of Credit offer a variable rate line of credit where the rate is usually tied into the prime rate of the bank. The required payment each month is only the interest on the outstanding principal of the line. This offers the advantage of keeping your payments lower and puts the principal pay down of the loan in your hands. Another advantage of the line of credit is that once you pay down the line you can access the money again in the future by writing checks with a checkbook that is provided by your bank. The slight disadvantage over a loan is the variable rate.