Tell me about HELOCs please

[ijack]

We would like to finish our basement in the next couple of years - we're undecided if we'll hire a contractor or if my dad will do the bulk of the work.
I'm tossing around options - either straight saving for it (in a very low interest MM account) or using a HELOC. Our mortgage is at 3.75%, our only other debt is my SL at 4%. We save about 10% for retirement right now and I'd like to focus on that sooner rather than later and we spend a butt load on child care.
What are your thoughts? I'm very interested in hearing from the non debt adverse

[SJ]

My first question is about your house.

How much equity do you have in it right now? How long do you hope/plan to stay?

[ijack]

We have right about 20% equity and our hope is to stay for a very long time (the only reason we would move would be if we relocated which is unlikely).

[dvlish]

we have a HELOC, used it for a car reno project. interest is based on APR i think so its very low and our paymnet is about $25 a month which is nothing. it is good for 10 years meaning we can draw on it over that period of 10. in 10 years it becomes due in full. we had to keep ours open for 3 years so as not to pay any fees on it. you can open one and never draw on it but the cash is there if you need it. better than having a cc IMHO unless of course you are one of those savers that has a quick 10-30 k sitting around from something major which we are not:) others might disagree or have another opinion but having one ready to go means you have instant access to the equity in your house should you need it. using one for a home reno is no problem to me but i dont mind having that extra debt for something like that. our goal is to get ours paid off this year and its very doable b/c the interest is so low unlike a cc:)

[ddi741]

We opened our HELOC at the same time we closed on our house. We have the $ there if we need it. We've used little amounts of a couple times for projects and paid it off pretty quickly

[LLYS]

My first choice would be to save for the renovations and pay cash.

Second choice would be a Home Equity LOAN (HEL) However, you do not have enough equity. It acts as a regular loan with a fixed amount borrowed and a fixed payment schedule.

A HELOC acts the same as a credit card and would cost more if the same amount was borrowed, cpared to a HEL.

Both the HEL and HELOC would be a higher interest rates than your mortgage.

[CloudBee]

I would just save the money.