While homes can be great investments, they can also hoard cash you might need for something else.

Here are two ways to get at that cash and some tips on what you should use it for.

"As the value of your home increases or as you pay off your mortgage, your equity grows."

What is home equity and how can you use it?

Equity is generally defined as the value of your home (determined by market price) minus the amount of your remaining mortgage. As the value of your home increases or as you pay off your mortgage, your equity grows. With a home equity loan — also known as a second mortgage — you borrow money against the value of this equity. For lack of a better term, you're borrowing from yourself.

You can take out a loan for a fixed period of time with a fixed payment schedule, or you can open up a home equity line of credit, which is a credit card with your house as collateral. The value of the home (and usually a percentage of that value the creditor is willing to lend on) minus the mortgage determines the amount of credit you have at your disposal. That number represents the amount you can borrow.

Other factors like those on your credit report help the lender determine your ultimate line of credit. Repayment schedules for home equity credit range from fixed to variable; likewise, rules regarding minimum balances will also vary depending on the lender.

Here, then, are some tips from the experts about some of the recommended uses of home equity:

Pay off credit cards

Many homeowners pay off their high interest credit cards with home equity. This is a sound idea, essentially swapping high interest debt for low interest debt. Better still, interest on home loans is tax deductible. The danger in paying off your credit cards with equity comes if you do it too often. Doing it once can help you get back on track; doing it every few years means you'll never have a chance to build equity and make money on your investment.

Invest in home improvement

Home improvement is a way to take equity out and (hopefully) increase your equity. Of course, the success of your plan depends on how much the improvement actually adds to your home's value. If you're adding a single element to your home, you'll probably use a home equity loan. But if you're making a series of improvements over time, it's best to consider the home equity line of credit.

Save toward retirement

Home equity is often the best way to fund a retirement, so the more you have, the better. Retirees with significant, but not substantial savings, often make retirement work because they own their home outright. That means an end to monthly mortgage payments, which reduces cost of living. For retirees who own all or most of their home, but have less in savings, there is the opportunity to cash out by selling and buying a smaller home or condo.

Finally, retirees who own their homes outright, but are cash strapped, can use a reverse mortgage (essentially letting the bank buy the house back while you live in it). The point is that building equity is always a good thing, but the more equity you have, the more options you create.

Invest in stocks/property

There's a high temptation to use equity that is "just sitting there" for investments. A common investment is income property, but stocks are also a possibility. People who own their homes outright are probably best suited to take this risk because they won't find themselves overcome by a series of loan payments. If you have a mortgage and you take out equity to buy rental property, you have three loans to repay. Two is manageable; three can be a disaster. If you choose stocks over income property, you may avoid loan payments, but your risk of losing everything increases.

Pay off bills

Medical bills can often be as crippling as the illness. While using home equity to repay those bills doesn't make you money, it can ease the financial burden by lowering your interest rates.

By contrast, paying for your education can be a great way to use your equity to invest in yourself. But before you take out a home equity loan, make sure that the rate you'll be paying is less than the going rate for student loans.

Use equity to your advantage

There are a lot of good things that you can use your home equity for, even if they don't appear on this list. What's important is that you don't use your home equity to buy consumables.