Yes, this is a good idea. Now let me back up my answer with proper reasoning.

The reason your parents are getting a home equity loan is because they don't have money to spare for home improvements. Now what does an average American/European or a Britisher do when he/she needs to make some home improvements and doesn't have money to spare? He gets a home equity loan!

I am sure you would have heard this word a lot of times and believe me this is how common this practice is. The loan that they are getting is out of the equity of their own house and the purpose they are taking out the loan is for the improvement of their own house. This is a good idea. It will not only increase the value of your house but if they make payments on time, they will easily be eligible for loans in the future too.

If you still have any doubts about their decision then please talk to them about it and let them explain to you why they are doing this. I am sure you would be in a better position to understand their point of view now that i have explained the whole scenario to you in detail.