1.  Know whether your lender has inserted a pre-payment penalty clause.

Lenders make money on the interest you pay on a loan over time. If they don't charge a fee for your loan, always check for the pre-payment clause that is almost certainly there. If you're going to sell or refinance within three to five years, you do not want to take out this loan.

2.  Don't take too large a credit line.

This can cause you to be turned down for future loans or credit because lenders may calculate in your available credit, not the amount you owe. If you have hordes of available credit and your income is only so-so, you can be turned down for loans even with a great credit score.

3.  Know the difference between the credit line and the loan.

The loan is an up-front lump sum of money, for which you make fixed payments until you pay it off in full. A home equity credit line is open; typically, you get a credit card for it, and you can take out advances as you need them. A home equity loan tends to have better terms than a home equity line of credit, but the credit line is more flexible. But for both, you can only be charged interest on outstanding balance; this means if you don't need the whole lump sum of a loan, you will probably pay less for the credit line overall.

4.  Know your equity line's lifecap, or top interest rate, and be prepared to make payments at that rate if necessary.

5.  Never take out a home equity loan or credit line from your favorite bank without shopping around for the best deal.

Most people don't look around. You may be able to get a better deal if you shop around, and you might even be able to take that deal to your home bank and bargain them down into that deal, too.

6.  Always get a good-faith estimate of your closing costs for the loan.

7.  You need to know that most home equity loans are not tax deductible.

Don't talk to the bank about this; instead, ask an accountant, a CPA, or even an IRS agent.

8.  A home equity loan is often cheaper than a car loan or standard credit card, but not always.

When you compare rates, you need to compare your home equity rate AFTER TAX SAVINGS to your credit card offer. Use this formula:

Effective Rate = Home-equity rate * (1-your tax bracket as a decimal)

For instance, if your home equity rate is 15%, and your tax bracket is 20%, your effective rate is .15 * .8, or 12%.If you can get a credit card at 12% or less, you may be able to beat the home equity loan; more, and your home equity loan is a better deal.

9.  Never get a home equity line of credit if you're getting ready to refinance your first mortgage.

Most mortgage companies will look at the combined loan amounts to determine your eligibility and your loan package. Make sure that your home equity line of credit won't cause your refinance to be turned down.

It's tempting, but don't get a home-equity line to pay off credit cards if your spending is out of control unless you're ready to tear up all the credit cards immediately. If you pay off the cards and then start using them to charge again, you're going to find yourself in even worse financial shape.