Your home equity rises not just because you're paying down your mortgage. Over time, the market value of your home will more than likely increase, or "appreciate"—further adding to your equity. For an idea of how much the property in your neighborhood has been appreciating, talk to your real estate agent.

What can equity do for you?
Equity doesn't just have to sit there, looking good on paper. You can actually use it like money in the bank by:

• Borrowing against your equity. You can take out a home equity loan (also called a second mortgage) to pay for whatever you choose. The interest is usually tax deductible, which is something you can't say about credit cards. Some examples of ways you can use home equity loans are:

• Consolidating debts
• Home improvements
• Your kids' college education
• High-priced goods such as cars or boats
• Starting your own business
• Medical or other emergencies