The phrase buyer beware is supposed to have buyers alarmed whenever they hit the malls or buy in the web. Home buyers should care for a similar warning-borrower beware-especially when it comes to home equity loans.

The famed Spider-Man was strongly impressed by the phrase, 'With great power comes great responsibility.' It reminded him to be cautious in the use of his great super skills.

House owners should also take those words of wisdom to heart. Many have access to a substantial source of financing-the equity in their houses. When tapped in the form of a mortgage loans, it can be used to pay school tuition, fund a business start, or consolidate debts.

As Spider-Man would tell any homeowner, though, there is huge responsibility with this financial clout. Use the money frivolously or choose the wrong mortgage loan, and you could pay a hefty price. It is better if you use mortgage calculator, if you are not sure what option to choose. It's fast and convenient, and will take you little time to see the pros and cons of the options you have.

Choose the adequate reason

Using mortgage refinance to spring for something fancy like a holiday will be entertaining and should give you a tax deduction, but it's not the best long-term move. After the suntan fades, the only thing you've done is increase main and long-term interest fees to your house payment.

Instead, use mortgage refinance for things such as house improvements or to start a business. These are lasting investments that presumably will continue to appreciate in value during the time you own the house. If you sell your home, you should be able to recover the the money you originally borrowed, plus appreciation.

Try to avoid using home equity to pay for school tuition. Instead, start investing funds after your child is born and then an investment's value add to your savings.

Choose the right mortgage loan

If you choose to do a mortgage refinace, you'll have to thoroughly choose your mortgage loan. Many people opt to consolidate debts into a first mortgage, such as an adjustable-rate mortgage (ARM) or a loan with a balloon payment. Be careful with these mortgage loans. The rate on the ARM will likely grow after the first period. With a balloon loan, you'll be required to pay the mortgage loan in full at the end of the five- or seven-year introductory period.

The wayout is a second mortgage, such as a home equity line of credit (HELOC) or a home equity loan. These loans have their weaknesses. A HELOC has variable rates, so if rates start to rise, you could find yourself in uncomfortable situation. A home equity loan has a stable rate, stable loan amount, and is maybe your safest way out. However, you'll need to be sure that you can afford the payments, and be watchful for any exorbitant fees.

Your house has super-strength when it comes to personal finances. Its equity can give you fast cash when you need it most. But with this power comes great responsibility. If you're going to tap equity, borrow thoughtfully. Otherwise, you'll find yourself in a trap of financial trouble from which even Spider-Man wouldn't be able to escape.