How do I determine which type of secondary home equity financing is best for me?

A reasonable guide for making this decision is to evaluate your intended use for the funds. If you have a pre-determined cost that will require a lump sum or fixed payment (i.e. major home improvements for which you have a written estimate) then you may prefer a traditional second mortgage with rate and term that are fixed for the life of the loan. Conversely, if you have a flow of undetermined expenses (i.e. misc. home improvements, misc. consumer purchases) then you may prefer the check writing convenience of a home equity line. With a home equity line of credit, you pay interest only on the funds you use or need, therefore with unpredicted expenses this may be the most cost-effective approach.