Home $weet home ... or financial folly

There are tempting ways to use your home for potential financial gain. The line isn't always bright, but there are some guidelines for when such moves can be smart ... or dopey.

Home Equity Loan
$30K HELOC 4.67%
$50K HELOC 4.04%
$30K Home Eq 5.00%
$50K Home Eq 4.36%
$75K Home Eq 4.36%

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Rates provided by Bankrate.com.
Smart home equity move
When tapping equity makes good sense
Paying for home improvements, credit card debt, emergencies ... if you have equity in your home, you're probably eligible to borrow against it by taking out either a home equity loan or a home equity line of credit (HELOC).

Here's when the move can be smart:

When rates are low, and you want make equity-boosting improvements to your home, borrowing against your equity can be a smart move since you'll be adding value to your home and will able to deduct the interest on the money you borrow to do so.

It also can pay if rates are low, and you have a lot of high-rate credit card debt that you want to pay off, assuming you're only using a small amount of home equity and don't plan to run-up your plastic again.

A HELOC can also augment your emergency fund -- especially if you've paid off most of your first mortgage and are about to retire. With a HELOC, you don't owe any money on it unless you draw against it.

(Here's when it's not a great idea.)

Prepay mortgage? Yup

Prepay mortgage? Nope

Tap equity? Yup

Tap equity? Nope

Renovate? Yup

Renovate? Nope

Get an ARM? Yup

Get an ARM? Nope
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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.