US Financial Management, Inc.

For another thing, banks use yields on shorter-term bonds, such as two-year or five-year treasuries as a guideline for their equity loan rates rather than yields on long-term mortgage backed securities. Those shorter-term yields are much more sensitive to the level of the Fed-controlled fed funds rate than they are to the long-term economic outlook.

As for home equity lines of credit, most banks set their rates based on the shortest-term market rate. It moves in lock step with the fed funds rate.

The Fed has raised short-term interest rates twice this year by a total of one-half percentage point, and is expected to continue raising rates. This is pushing rates on home equity lines of credit higher for both new and existing borrowers, as HELOCs carry variable interest rates.

But equity loans and lines of credit usually come without closing costs, so they can be $2,000 or $3,000 cheaper than first mortgages.

If you can get as much money as you need with good terms on a home equity loan as you can on a mortgage refinance, and you can get a rate that's attractive and lock it in, then that seems like a very wise thing to do.