Alternatively, you could take a home-equity loan. The size of the average home-equity loan leaped by 33 percent last year, to $34,318, according to the Consumer Bankers Association.

Interest rates have been plunging, Bankrate.com reported. You might pay around 7.5 percent (that's a variable rate) perhaps with a 6.5 percent introductory rate for the first few months. Some lenders don't even charge closing costs.

So compare both options over the time you expect to be in your home.

The home-equity loan might be the better deal.

Equity options

Traditionally, people tapped their home equity only for big-league purposes say, for college tuition or renovating the house. Then they started to borrow for money to pay off credit-card debt. Mortgage interest is tax-deductible while credit-card interest isn't.

In the mid-'90s, you started borrowing to invest.

It might pay to carry a larger mortgage in order to make the maximum contribution to a 401(k). You might also borrow to buy a second home, if your job is secure and you could afford two mortgages even in harder times. But borrowing to buy tech stocks was obviously a dumb idea.

Look into your soul before borrowing to pay off credit-card debt. If you've been overspending your income, a clean credit card becomes an invitation to shop, shop, shop. You're better off paying your bills with current income, so you can learn budgeting and impulse control.

As for mortgages like Wells Fargo's think long and hard before taking a loan that requires no principal payments.

On a $400,000, five-year, interest-only loan, you'd pay $328 a month less than you'd pay on a conventional loan (assuming 7 percent interest). But at the end of the term, you'd still owe the original $400,000.

Don't kid yourself into liking larger interest payments because they increase your tax deduction. You're paying the bank real money, after tax.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.

Next

For reprint and licensing requests for this article, CLICK HERE.