If you go for line of credit type of home equity loan then variable rate must be based on a publicly available index. The interest rate for borrowing under the home equity line changes, mirroring fluctuations in the value of the index. 

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If you are considering a variable rate, check and compare the terms. Check the periodic cap, which is the limit on interest rate changes at one time. Also, check the lifetime cap, which is the limit on interest rate changes throughout the loan term. Ask the lender which index is used and how much and how often it can change. An index (such as the prime rate) is used by lenders to determine how much to raise or lower interest rates. Also, check the margin, which is an amount added to the index that determines the interest you are charged. In addition, inquire whether you can convert your variable rate loan to a fixed rate at some future time. 

Due to high competition some lenders offer unusually low rates, that are good for the introductory period i.e. about six months. After that, the rate is adjusted according to a public index that reflects interest trends. The lender uses that index to decide how much the annual percentage rate will change during the life of the loan. 

The lender adds a margin, or fixed number of percentage points, to the index to determine the new rate each time it is adjusted. This can happen once a year or more. Each point is equal to 1 percent of the loan.

Variable-rate plans secured by a dwelling must, by law, have a ceiling (or cap) on how much your interest rate may increase over the life of the plan. Some variable-rate plans limit how much your payment may increase and how low your interest rate may fall if interest rates drop. 

Some lenders allow you to convert from a variable interest rate to a fixed rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan. 

The best news is that the interest on home equity loans is usually tax-deductible for up to $100,000 on your home's principal mortgage balance.

The sooner you pay off the loan, the less it will cost you in interest.