Rather than having to decide right now about how much you'll need and hope that you guessed correctly, you can establish a HELOC and borrow from it continuously during it's draw period and you will only pay interest on the funds that are outstanding at any given time. For example, assuming you qualify and your home has enough equity, you can take out a $100,000 HELOC but only spend $5000 over the first three years. Over these first three years, the homeowner will only be required to pay interest on the outstanding $5,000, not the entire $100,000.

This can translate into serious savings of both time and money since having that kind of flexibility with an HEL would require multiple loans-which potentially could include paying closing costs for each loan.

However, a HELOC often has annual fees, and depending on that total versus the cost of an HEL's closing costs (especially if a borrower were to take multiple home equity loans), the advantage can easily shift between the two.

Monthly payments are yet another potential for being an advantage or disadvantage.

As where an HEL's payments don't fluctuate, a HELOC's payments will, depending on the amount borrowed, as well as interest rates (particularly since HELOCs often have adjustable interest rates).

This extends to another advantage/disadvantage paradox. HELOCs allow the borrower to make minimum payments on the interest only, which can be helpful in the short-run.

However, in the long-run-like a credit card-this could create problems for the borrower that doesn't carefully understand the implications of making minimum/interest-only payments, especially if they continue to borrow more and increase the principal.