From TexAgs Sponsor, Aggieland Credit Union:

If you're thinking about pursuing a home equity loan or line of credit, here are four other things you'll need to know.

1. You'll Need Equity


Equity, of course, is the share of your home that you actually own, versus that which you still owe to the bank.

Generally speaking, lenders are going to want you to have at least an 80% loan-to-value ratio remaining after the home equity loan. That means you'll need to own more than 20% of your home before you can even qualify. So if you have a $250,000 home, you'd need at least 30% equity or a loan balance of no more than $175,000 in order to qualify for a $25,000 home equity loan or line of credit.

2. One of Two Types


There are two main types of home equity loans. The first is the standard home equity loan, where you borrow a single lump sum. The second is a home equity line of credit, or HELOC, where the lender authorizes you to borrow smaller sums as needed, up to a certain fixed amount.

The type you choose depends on why you need the money. If you're looking at a single, major expense such as replacing the roof on your home a standard home equity loan is usually the best way to go.

If you need to access various amounts of money over time such as if you're doing a home improvement project over a few months, for example, or to support a small business you're starting a home equity line of credit may be more suitable to your needs.

3. Think Big


There's one thing about home equity loans, they're not particularly useful for borrowing small amounts of money. Lenders typically don't want to be bothered with making small loans. $10,000 is about the smallest you can get.

4. It's Still a Mortgage


It's easy to forget sometimes, but a home equity loan or line of credit is a type of mortgage, just like the primary home loan you used to fund the purchase of your home. And as a mortgage, it offers certain advantages and disadvantages.

One of the advantages is that the interest you pay is usually tax-deductible for those who itemize deductions, the same as regular mortgage interest. There are certain limitations though, so check with a tax adviser to determine your own eligibility.

Second, because it is a mortgage secured by your home, the rates tend to be lower than you'd pay on credit cards or other unsecured loans. They do tend to be somewhat higher than what you'd currently pay for a full mortgage, however. On the downside, because the debt is secured by your home, your property is at risk if you fail to make the payments. So you want to treat a home equity loan with the same seriousness you would a regular mortgage. That's the most important thing of all to know.

Source: http://www.foxbusiness.com/personal-finance/2014/03/06/5-things-need-to-know-about-home-equity-loans/