As the housing market continues to fluctuate, homeowners are looking for ways to leverage their home equity. With interest rates on home equity loans expected to fall in February, many are eager to take advantage of the opportunity.

However, new tax guidelines are causing confusion for those looking to use their home equity loan to purchase a second home. According to the IRS, interest on a home equity loan may still be deductible if the funds are used to buy, build, or substantially improve the property.

But how does a $50,000 home equity loan differ from a $50,000 Home Equity Line of Credit (HELOC)? While both allow homeowners to borrow against their home equity, a loan is a lump sum payment with a fixed interest rate, while a HELOC allows for a revolving line of credit with variable rates.

With the housing market showing signs of stabilization, many homeowners are turning to their home equity as a source of financial security. As interest rates on home equity loans drop, and tax guidelines clarify the rules for second home purchases, now may be the time to consider tapping into your home's equity.