In 2008, the strategy for home equity debt is simply this: Employ common sense. Use the debt appropriately and don't get in over your head.

Tailor the loan to your needs
There are two kinds of equity debt: fixed-rate home equity loans and variable-rate home equity lines of credit, or HELOCs. Read Bankrate's handbook on home equity basics to get the nuances on how they are used differently, but it boils down to this: Equity loans generally are used for one-time purchases, and lines of credit are used for recurring purchases.

A homeowner might use a home equity loan to pay for an addition to the house or to capitalize a business startup.

Best moves to make in 2008

• Tailor the loan to your needs. • Roll it. • Don't go overboard.

A line of credit might be used for tuition payments or even to pay for vacations.

These aren't ironclad rules. For example, a home addition isn't truly a lump-sum purchase; generally, the contractor is paid in three or more draws as construction benchmarks are reached. Thus, a home addition has elements of both a lump-sum expense and a recurring expense.

In the last few years, HELOCs have been more popular because they are more flexible and have interest-only minimum payments for the first few years.

Roll it
Consider rolling home equity debt into a fixed-rate loan if you refinance. The resulting monthly payment might amount to less than what you would pay if you refinanced only the primary mortgage.

Here's an example. Say you have an ARM with a balance of $250,000 that you need to refinance before the rate jumps sky-high. And say you have a $30,000 balance on the home equity line of credit at 7.5 percent.

Play around on Bankrate's mortgage calculator to scope out your options. It lets you plug in any interest rate or mortgage term that you want. In this example, we'll assume you've had the house and the mortgage for five years, and you want to pay off the refinanced mortgage in 15 years instead of 30.

You're still in the interest-only period of the line of credit, but we'll assume that you want to pay principal, too, so you can pay off the balance in 15 years. Bankrate's calculator says the monthly principal and interest on the HELOC would be $278.

Let's say you can refinance the principal mortgage at 6.5 percent. If you refinance only the primary mortgage for $250,000, the monthly principal and interest would be $2,178. The total monthly principal and interest payments on the primary mortgage and the line of credit would be $2,456.

But if you get a $280,000 loan when you refinance -- paying off and getting rid of the line of credit -- the monthly principal and interest would total $2,439. That saves $17 a month over keeping two separate loans.

Don't go overboard
A home equity line of credit works like a credit card. In fact, in many cases, that's exactly what it is -- you get a plastic card and you use it to borrow against your house. And then the payments are interest-only for the first few years. It's easy to get sucked-in and borrow more than you can truly afford. Then the time comes when you have to pay principal in addition to interest.

Don't expect the lender to urge moderation in borrowing. That's up to you.