You can borrow money against the value of your home with a home-equity loan or a home-equity line of credit. You can secure both with a second mortgage. Both provide access of up to 100% or more of the equity in your home.

A home-equity loan is usually distributed in 1 lump sum. Its rate is fixed for the entire term of the loan.

You can access a home-equity line of credit at your discretion. Unlike a home-equity loan, the rate for a home-equity line of credit fluctuates based on an index. It often converts to a fixed rate after a predetermined period of time.

Both provide access of up to 100% or more of the equity in your home.

Tax advantages

If you itemize, you might be able to fully deduct either type of loan. This distinguishes these loans from other forms of consumer credit. Since the collateral is your home, interest rates are significantly lower than other consumer loans or credit cards.

Potential risks

Since your house is the collateral for these loans, failure to repay can cost you your home. Also, think carefully about what you plan to buy with your loan or credit line. If you’re tempted to overspend, a home-equity loan with a lower, set amount might be better than a flexible line of credit.

To learn more, see these tax tips:

• Second Home
• Self-Employment Deductions