[dshobbies]

Cathy,

Please keep in mind there is a difference between a home equity loan, also known as a second (or third) trust deed and a home equity line of credit (HELOC). A 2nd TD is for a fixed amount, ususally for a fixed rate of interest (not variable), fixed payments and a pre-determined term (payback time). A HELOC is issued for a maximum amount, ususually based on 80% of your home's value after subtracting your existing mortgage, on which you can draw as needed. IRS interest deduction limitations do not dictate the maximum amount the bank will lend. Interest rates are usually variable as is the payback term. Payments are not fixed. Often there is a 10-20 year ceiling on the loan but this can be renegotiated as you go along. As you pay down the priciple the money then becomes available to use again for any reason and is tax deductible up to IRS limits, unlike credit cards and car loans. Fees for either type of loan vary from bank to bank but a HELOC can also have a small yearly fee, sometimes negotiable.

Unless you prefer a 2nd TD for a specific reason, such as locking in an interest rate, the flexibility of a HELOC makes it more attractive. HELOCs can also contain a provision for converting to a traditional 2nd TD at any time.

All of the above are questions you should ask before signing any papers.

Good luck, Dale