Here's an Example

If the current Appraised Value of a home is $500,000 and the principal balance is $300,000 the difference of $200,000 is the equity balance.

(Note; in order to avoid required PMI, or Mortgage Insurance, a 20% equity position must remain).

Therefore we can reduce the $500,000 appraised value by 20% thereby reducing the "usable value" to $400,000. The difference between the usable value (400,000) and the principal balance (300,000) is, of course, $100,000 -- this amount can be used to pay off almost any other existing loan including:

• 2nd Mortgages
• Personal loans
• Car loans
• Home Improvement
• High Interest Credit Cards
• Student loans
• Medical bills

Equity can also be "cashed out” and used in full or in part for home improvement, or even deposited into 401k investments, or stocks/money market funds.

Some of the key advantages associated with home equity loans are:

• Paying off high interest rate credit cards
• One loan, with one low monthly payment
• Interest portion of mortgage payments are tax deductible.
• 2nd Mortgages can be rolled into the reduced rate 1st Mortgage.

There are no significant drawbacks to consolidating debt or cashing out equity. However, it should be noted that a considerable amount of equity is necessary to maximize the potential benefits and savings.