Homeowners looking for some extra liquidity can draw on their equity if they have some built up in their home. Equity is the difference between the price of the home and any outstanding debt the home has, such as mortgage debt. Therefore, a house valued at $200,000 that had a remaining balance of $80,000 on the mortgage loan would have $120,000 of equity. That equity can be accessed through multiple means: a home equity loan, also known as a second mortgage, through a reverse mortgage, or through an equity mortgage.

An equity mortgage enables the homeowner to carry out a process known as mortgage equity withdrawal, or MEW. MEW is a fancy way of saying that the homeowner withdraws the value of the equity from their home through any of the means mentioned in the previous paragraph. In fact, an equity mortgage is another term for a home equity loan or a second mortgage; the three terms are interchangeable. This makes talking to loan officers confusing because three different terms actually refer to the same type of loan.

Equity mortgages, therefore, have the same terms and conditions as home equity loans and second mortgages. The lender stakes a claim in the equity of the home, in exchange for advancing a sum of money to the borrower. This sum is lent at interest, and so the homeowner has new monthly interest payments to make. The withdrawn equity can then be used for whatever the homeowner wishes. It is important for the homeowner to know that taking out an equity mortgage is only feasible in time of economic prosperity, also known as inflationary booms.

This is because of the danger to the homeowner from falling house prices: they could suddenly find that the home is worth less than the value of the equity mortgage they used to take out the original equity. When this situation arises, it is best to continue paying the loan, since it is not worth it to walk away from the house.

For homeowners who want to get into real estate investing, an investment property mortgage loan is called for. This is actually great because the homeowners can use the equity from their second mortgage loan to put a down payment on several properties or simply buying one property outright, thus leveraging their money.