The Home Equity Line of Credit is probably one of the three top bank products/accounts ever invented. People love them.
Up until about the early 1980s, the equity homeowners had in their homes technically could be accessed via a 2nd mortgage but – in those days – 2nd mortgages were frowned upon. That was unfair. A homeowner’s equity in their home is an asset that belongs to them and they deserve to have a way to use that asset. That’s what the Home Equity Loan and Home Equity Line of Credit gave homeowners.
The names are similar and sometimes they are casually used interchangeably. But a Home Equity Loan is a fixed-rate loan for a certain amount of money taken all at once. A Home Equity Line of Credit is a revolving line of credit that you can use/borrow from, repay and then use/borrow from again.
Rates on Home Equity Lines of Credit are usually adjustable. Because they’re so flexible, Home Equity Lines quickly became more popular than Home Equity Loans.
Many people believe that – if they have equity in their home – they can take out a Home Equity Line. This is the most significant misconception about Home Equity Lines. The fact of the matter is that you have to have equity and you also have to have a source of income or assets to re-pay the Line.
A year or so ago, a young homeowner said in a news report that she’d lost her job and she planned to take out a Home Equity Line to tide her over for a few months until she got a new job. Then she discovered that – in her case – not having an income would prevent her from taking out a Home Equity Line.
That is one of the reasons why it can be strategic to have a Home Equity Line with no annual fees or non-use fees already in place.
Sometimes people say, “But I don’t understand – I have plenty of equity.” Federal lending regulations across-the-board insist on a borrower having a demonstrable ability beside their equity to comfortably make any payments.
Most homeowners with equity easily qualify for a Home Equity Line. If your specific situation makes qualifying something that concerns you, speak to a local lender about it and other possible options.
Some people also believe that – because of the name – a Home Equity Line can only be used to pay for things for their home. That is not true. A Home Equity Line can be used to pay for anything. (Some Lines might have a minimum draw – ask your lender or check your paperwork.)
Changes to tax laws have led to some confusion about the deductibility of interest paid on Home Equity Line draws. The best advice is still to check with your tax advisor so you have the most recent information.
Right now, cash-out refinances have become much less popular because the rates people have on their mortgages are lower – and sometimes much lower – than current mortgage rates. So a Home Equity Line of Credit becomes a convenient way to access your equity while not touching your low-rate mortgage.
Barring unusual circumstances, it’s easy to say that every homeowner should consider having a no annual fee/no non-use fee Home Equity Line. Apart from any closing costs (which are usually quite reasonable), it costs you nothing to have it there and people often find that having the Line comes in very handy.
From the “Smart About Money” Canton Citizen column published on September 18 2025.
Nick Maffeo is the President & CEO of Canton Co-operative Bank – right next to the Post Office – in Canton.
Have a question? Email to info@cantoncoopbank.com.