There are TWO main types of equity loans, and they have different names that are sometimes confused. There are regular second mortgages that are fixed, and floating equity lines that behave like a credit card account. Each has its good points detailed in the two sections below. Note that on both, the closing costs are MUCH lower (sometimes even NO costs) when the loan amount is under $50,000. Faster funding, some close under a week.

Regular second (or third) mortgages:

These are regular fixed rate mortgages in a 2nd position behind your existing loan. They are almost always higher interest rates, and used to go to or above the actual appraised value, but those are VERY RARE now due to decreasing market conditions and many foreclosures. They are usually amortized from 5 to 30 years but if the existing first is shorter, they will match its remaining term. Plus: Usually lower rate than Equity Line. Minus: Fixed term so it is harder to pay off, and you can't reduce payments as loan amount decreases.

Floating Equity Lines:

H.E.L.O.C. stands for Home Equity Line Of Credit. These are usually in second loan position but can be in first if your home has no existing loan. They are like a credit card account. You can write checks on the account to use it only when you need the money. Your payments are based on the amount out at any time, and go up or down with the balance. These loans are great to use for emergencies or investment opportunities.  Plus: Payment based on balance so it goes down. Early payoff is easier. You always have it to use again without new closing costs! Minus: If prime rate goes up, it can be a higher rate than regular fixed.  These are the programs that you watch when the news says the Fed cut or added to rates. These and CREDIT CARDS.  That Fed Rate change doesnt have a direct effect on regular mortgage rates!

Note that on HELOCS, (Floating Equity Lines) it can take several days to over a week to get your payment book, check or credit card on the account. If you need money quickly it must be taken out at close of escrow. Your payment dates starts from that time.