Second Mortgage: Revolving Line Of Credit

June 2000  -- With all the credit card offers that come in the mail, it's hardly difficult to establish a line of credit. But with interest rates in the 20% range, is there a better way to finance home improvements or make some high-end purchases?

"If a person you know wants to buy a second car ... redo their complete kitchen, or is going to add an extra bedroom because they're about to have another baby, those are all great reasons in order to create a revolving line of credit," said Marlene Cintron of Merrill Lynch.

A revolving line of credit is actually a loan borrowed against the equity built up in a home, sometimes called a home equity loan, or second mortgage. Aside from giving you access to a ready source of cash, the interest incurred is entirely tax-deductible -- something not allowed with credit cards or bank loans.

"I think it should be the primary consideration for any individual who needs to borrow money for an extraordinary or major expense and they will do quite well by choosing this versus any other type of borrowing," Cintron said.

For homeowners, a home equity loan can be a valuable asset. Borrowing against the equity in your home gives you a ready line of credit, generally low interest rates and a deduction at tax time.