To avoid confusion, please remember that a refinance loan that allows you to obtain additional funds from your home equity is sometimes incorrectly referred to as a "home equity loan". The more accurate term is a “cash-out refinance loan” since it is a new loan which serves two purposes: (1) to pay off the existing loan on the property and (2) to access your home’s available equity and receive additional funds at closing (but not in “cash”), which may be used for any purpose. A cash-out refinance loan is considered a first-lien loan.

Steer clear of using home equity loans for items that depreciate, that do not create wealth or for “wants” rather than “needs.” Car purchases, day-to-day living expenses or a vacation are not good reasons to use a home equity loan.