Home equity debt got you in trouble? Here are some tips to remember to help you climb out of the hole.

1. Take only what you need
Maxing out your HELOC, or borrowing a significant amount, can impact your credit score. Best bet: Unless you truly need the money, leave it alone.

2. Bad reasons to tap home equity:

  • Debt consolidation: Same debt, higher stakes. Credit cards are unsecured, which means if something happens and you can’t pay, you lose the cards. A home equity loan is backed by your home. If something happens and you can’t pay, you lose the house.
  • Tax deduction: It’s like “saving” money by buying on sale. You’ll get about one-quarter to one-third of your interest back as a deduction, which means you’re still paying 66 percent to 75 percent of that interest out-of-pocket.
  • Investment: Gambling with money that isn’t really yours.

3. Keep an eye on your rate
Is your HELOC rate based on the prime rate (or some other measure) that’s been decreasing? Your rate should follow suit. If it doesn’t, re-examine your contract and contact your lender.

4. Fight for your loan
If your home hasn’t dipped in value, but the lender wants to scale back or eliminate your home equity line of credit, you can appeal the decision. If the value of your home has not dropped, be prepared to document that and contact your lender. At worst, you lose nothing. At best, you get to keep that credit line.

5. Remember those points
If you paid points on a recent home equity loan or line of credit, you can likely deduct them on your taxes, just like other forms of mortgage interest. Check your Schedule A instructions for details. Points should be listed on your closing documents or your lender’s 1098 statement.

6. Planning a fixed-rate refi? Investigate rolling an existing home equity loan or line of credit into your new mortgage
The benefit: a fixed (and it is hoped) lower rate for all of your home debt. Test possible savings with Bankrate’s Mortgage payment calculator.

— Updated: June 16, 2008