Advantages

• A HELOC can be a good choice if you can consolidate your debts at a lower interest rate. You only need to pay interest on what you’re currently borrowing.
• HELOCs are flexible and can be used for anything you need the cash for, including college tuition or other education-related costs.
• A second mortgage may be your best option for borrowing a large sum of cash, which can be helpful for costly home improvement projects.

Disadvantages

• You should also be careful about using a HELOC to pay everyday expenses. Though it might start to feel like a regular credit card, you’re trading valuable equity for the money you borrow from your HELOC.
• There are risks whenever you take on debt, especially one tied to your home. You could lose your home if you cannot make payments on your HELOC.
• If your rate goes up, or your draw period ends, and you must go from making interest-only payments to complete payments, your finances could suffer a shock from the increase.

You should also be aware that most HELOCs have variable rates, meaning the interest rate you pay will change with fluctuations in the market. You may get a HELOC with a fixed rate or a hybrid that allows you to convert to a fixed rate from a variable rate. However, these plans can come with restrictions that need to be considered.

Depending on your lender, you may also have to pay specific fees, such as an annual fee for having the account or an origination fee that covers the cost of setting up your loan.