At the simplest equation, start with the value of your home and subtract the outstanding balance which is owed against your home. This number represents the amount already paid or the ‘equity’ you have built in your home. Equity in a home is seen as an asset and can be utilized to gain access to cash without paying off your mortgage or selling your property.

Anytime you increase the value of your home by doing home improvements, you increase your equity position. Also, simply by making your regular monthly loan payments and paying down your loan, you are increasing the equity available to you. Better yet, pay some extra towards principal whenever possible to accelerate the pay down of the principal balance and gain equity even faster.

The equity in your home is considered an asset. For many people, their home is their biggest asset. If you sell your home, the more equity you have, the more money in your pocket! Additionally, you can borrow against that equity to consolidate bills, complete home eimprovements, cash-out to buy other assets or secure a HELOC for any future needs that may arise.

A HELOC is a loan that functions similar to a credit card, but uses your home as collateral. You have a max credit limit based on the equity available in your home, and you can advance the money and pay down as often as you want during the term of the loan (known as the draw-period.) You only pay interest on the amount advanced at any given time. 

The primary difference between a HELOC and a Second Mortgage is the HELOC is a line of credit, and a Second Mortgage is a home loan.

 • A HELOC and a Second Mortgage also have a different set of rates and terms due to the fact the HELOC is a revolving line of credit, and the 2^nd Mortgage is a permanent loan.

• Second Mortgages are created based on the set dollar amount you wish to borrow, which you receive the full funding at the time the loan is closed.

• A HELOC payment changes based on amount withdrawn, but a Second Mortgage payment is the same until the loan is paid in full.

Equity in your home is accessed in the form of cash and cash can be used for whatever you chose, but here are some more common ways to utilize your home’s equity.

1. Paying off or consolidating credit card debt 
2. Funding a vacation 
3. Paying for weddings or important celebrations 
4. Starting a business 
5. Making home improvements and upgrades 
6. Paying medical bills 
7. Making key purchases, such as a car or a truck 
8. Funding investments 
9. Set aside for an emergency fund
10. Funding a student loan for yourself or your child