Your creditor or bank will calculate your equity by subtracting the amount of your mortgage from the current value of the house. This leaves the amount you've paid. Take 80 percent of that and you have the loan you will probably be offered by most banks.

If you own a home that is valued at $250,000 and your unpaid mortgage is $150,000, you have $100,000 equity in your home. 80 percent of $100,000 is $80,000 and that's how much you can usually borrow.

Whether or not you get this home equity line of credit has nothing to do with your income, investments, stock, your liquid capital, how much cash you have in your savings account, credit cards, or credit reference. It has nothing to do with the financial state of your family, your husband or wife, or where you work.

Unfortunately, if you fall into debt or one of your children falls ill and you have no extended family to rely on for finance, you could lose your home. A home equity line of credit is essentially a second mortgage and two mortgages means that you've essentially put up your house as collateral.

It is not a good idea to stake your residence and family's funds on a non-essential purchase like a vacation home or adding on an extra family room or bathroom for when your mother or father come visit. There's no point in making the homestead more homey if you have nothing more than hope that you will be able to maintain the payments. It's an extra immediate payment every month that may bleed your assets dry.

If you are sure that your budget can handle it, then build the extra bedroom or bath. Extra rooms raise the value of your estate as well as increase your general household environment. It may be a better idea to keep your home equity line of credit as a last resort safety net instead of gambling on a future that is uncertain.