Rich Rea

Answer: Much of it boils down to interest rates and where they're heading, said Rich Rea, vice president of Sunrise Bank of Arizona, Phoenix.If you expect rates to stay low, or at least not to rise too quickly, the credit line, with its floating rate, is the pick.

With today's rates, Rea said you'd save about $1,400 a year with the credit line.You could use that money to further reduce the balance on the line or to invest.

"They're fortunate to have the opportunity, as a result of their good credit scores and their equity in their home, to have a choice," Rea said."Given where the rates are today, it looks like economists are saying they would be better off with the home-equity line until prime rises above 7.5 percent."

Of course, a sudden jump in rates above that level would make the fixed rate on the existing home-equity loan look good.Rea also noted that it's worth considering how an unforeseen event - a reduction in income or some sort of emergency expense - would affect your ability to pay.

"Anytime that anybody is making these decisions, it's not a pure call from interest rate to interest rate," he said.

Contact us with your financial questions and details, and we may respond in print.We will publish only your initials, but we must be able to reach you by phone.Reach Money Matters at (602) 444-8616, moneymatters@arizonarepublic.com or Money Matters, The Arizona Republic, 200 E. Van Buren, Phoenix, AZ 85004.

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