After you have been living in your house for some time, assuming that real estate prices have been increasing, you begin to build equity in your house. Banks allow you to borrow from them this value or equity as a line of credit that can be paid off over time at the prevailing interest rate at the time that you secure the loan. Many people use this loan to do necessary improvements in their home, which may increase the home’s value.
Home equity loans can be used for many purposes, such as buying a car or going on vacation. A better use, though, would be home improvements such as a kitchen remodel, which could then increase the value of your home.