Equity is the difference between how much a home is worth and how much is owed on the mortgage(s). For example: You buy a home for $200,000. You make a 20% down payment of $20,000 and borrow $180,000. The day you close on the house, your equity is the same as the down payment - $20,000.

To better understand equity, let's fast forward a couple of years. You have been making monthly payments faithfully and have paid down $5,000 of the original mortgage amount of $180,000. You now owe $175,000 to the lender. At the same time, the value of the house has increased to a current market value of $300,000. Your new equity amount is $125,000. That is: $300,000 (home's current appraised value) minus $175,000 (amount owed) = $125,000 (equity).

Great! Now what? Below I've listed some links of options you have with using your equity.