when you own a home, you’re building equity. And a lot of people use that equity as collateral to borrow money, especially when they’re borrowing to make a big purchase like a car or a vacation. Home equity loans are for tax deductible interest, lower rates and longer pay back, so they can be a smart idea.

But the first thing you need to think about when you’re drawing up that borrowing plan is which type of equity loan you’re looking for - a regular loan or a line of credit. Whats the difference? Well a home equity loan is really just a second mortgage and it acts like a first mortgage. In other words, you lock in an interest rate, you’re payments are fixed, and so is the amount of time you have to pay the loan back.

A line of credit though is more like a credit card. The interest rate can fluctuate, you can draw on it or not at your whim, and the payments and rate of the loan will change accordingly.

So which should you use? Well now that you know the difference, make the loan fit the purpose. In other words, if you’re borrowing for a non-recurring expense like a home addition, use a fixed loan like a home equity loan. But if you’re going to be taking out a little here and paying it back and taking out a little there, like for school expenses, a line of credit may make more sense.

But here’s a warning. In some parts of the country where prices are falling, lenders have already canceled already approved lines of credit. So if the bubble has burst in your neighborhood, keep that in mind.

What is mortgage cycling? To put it simply, its just a way to use the existing equity in your house to pay down your mortgage faster. The concept is based on the fact that when you take out your mortgage, the payments are initially interest heavy and you use the home equity to pay directly towards principal so that you can pay down the mortgage quicker.

The best way mortgage cycling works is to use a Home Equity Line of Credit or HELOC, because being that its a line of credit, you can access this repeatedly. You take the portion of equity from the home equity loan and apply that towards the first mortgage. By doing so, you’re paying your principal faster and thus pay the mortgage balance quicker.

You also have to make sure you can pay off the home equity line of credit every 6 to 12 months so you can start the process over again, thus the term ‘mortgage cycling’.

A common question asked is are there any risks to mortgage cycling. And there are some risks. The main thing you have to pay attention to is that you have to be disciplined in order to make this work. You have to be able to pay of that home equity line of credit in a very timely fashion so you can quickly take out another HELOC loan. You have to be committed to this strategy for the long term.

But if you know that you’re not going to spend that money on a car or boat, then you can really get your mortgage paid down much quicker. The temptation is always going to be there to use those funds to do other things.

So, if you can play with the equity in your house responsibly, then instead of risking a default and possibly foreclosure, you could have your mortgage paid off in as little as 10 years.